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Toll Bridge
Interpublic is an international advertising agency. Advertising agencies, according to Warren, earn a royalty on the growth of others. When manufacturers want to take their
product to market, they have to advertise, so they use an agency. Agencies produce and place ads in the media, and are paid a percentage of what the advertiser spends for
these services. Agencies are almost inflationproof. Inflation causes advertisers to spend more for the same amount of work, and the more advertisers spend, the more the
agencies make.
Agencies are service businesses, so they spend only modestly on capital equipment, which means that profits don't have to be designated to replace worn-out plants and
equipment.
Plus, only 4% of U.S. advertisers change hands every year! This means that despite the public assumption to the contrary, big accounts often do stay in place. Many of the
large agencies that dominated the marketplace years ago still dominate the market place today. Seven of the top ten are in their fifth or sixth generation of management.
The numbers on Interpublic are great. For the last ten years it has earned an annual return on equity of 15% or better. In the last three years the annual return on equity has
been over 20%. Per share earnings for the last ten years have been growing at an annual rate of 13.8%.
Check it out.
Value Line follows the company, and you can get an annual report by calling 212-399-8000.
KNIGHT-RIDDER
Consumer Monopoly
This is a newspaper publishing company. It owns thirty-two daily newspapers in fifteen states. Warren likes newspapers.
S&P follows it, and you can get to read its annual report if you call 305-376-3838.
LEUCADIA NATIONAL
Toll Bridge
This is a property-casualty insurance company that gets above-average returns on equity and could have been bought for below book value from about 1985 to 1992.
S&P follows it and an annual report can be yours by dialing 212-460-1900.
LOEWS CORPORATION
Consumer Monopoly
Laurence Tisch has control of this company, and he has been friends with Warren since the 1960s. Tisch knows how to make money. Loews used to own 23% of CBS, which
it sold to Westinghouse for $890 million. The company also owns CNA Financial Corp. and Lorillard Inc., the fourth-largest tobacco producer in the U.S.A..
Value Line and S&P follow it, and you can call Tisch at 212-545-2000 and he will send you an annual report.
MBIA INC.
Toll Bridge
This is the insurance company that insures the timely payment of principal and interest on municipal bonds. Municipalities, like your local county, issue municipal bonds to
pay for such things as hospitals and airports. If they cover the bonds with insurance from MBIA, they get to pay a lower rate of interest because the investors believe that
insured municipal bonds are safer than those that aren't insured.
The company went public in 1987. Its annual return on equity is in the 13% to 15% range for the last five years. Per share earnings for the last five years have been growing at
an annual rate of 11.7%.
Value Line follows it, and you can get an annual report by calling 914-273-4545.
MCDONALD'S CORP.
Consumer Monopoly
With 9 zillion sold, the majority of the world has probably consumed a few McDonald's hamburgers. Alone, I have probably consumed one thousand of them! Warren loves
this company. They have made the hamburger into a brand-name product, not an easy feat.
The company over the last ten years has had a yearly return on equity of between 16 and 20%, which is delicious. And its per share earnings have been growing at an annual
rate of 13.4%.
Value Line follows it, and you can call Ronald McDonald for an annual report at 630-623-7428. Internet: http//www.mcdonalds.com.
MEDIA GENERAL INC.
Toll Bridge and Consumer Monopoly
Media General is a major newspaper publisher and owner of TV and cable systems. A group led by that genius of value investing Mario Gabelli has a ton of the stock.
S&P follows it, and you can get an annual report by calling 804-649-6000.
Internet: http//www.mediageneral.com.
MERCURY GENERAL CORP.
Toll Bridge
Mercury is the largest agency writer of passenger auto insurance in California, and in case you don't know, California has a lot of cars. It gets great returns on equity.
S&P follows it, and dialing 213-937-1060 will get you an annual report.
MERRILL LYNCH & COMPANY, INC.
Toll Bridge
A diversified financial services company that has a huge retail brokerage operation working in its favor. Occasionally you can buy it for less than its book value. Check it out.

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23-Oct-10