Investing Guidelines: Management Tenets 93offers. He looks for a business that “has competitive barriers, does not re-
quire extensive capital expenditures, and has reasonable pricing power.”
Furthermore, he notes, “we have a strong preference for businesses we
know” and given the choice, “we’re more likely to invest in a handful
of big bets rather than spread our investment dollars around thinly.”^9
Graham’s acquisition approach mimics Buffett’s strategy at Berkshire
Hathaway.
The dynamics of the newspaper business have changed in recent
years. Earlier, when the economy slowed and advertisers cut spending,
newspapers could maintain prof itability by raising lineage rates. But
today’s advertisers have found cheaper ways to reach their customers:
cable television, direct mail, and newspaper inserts. Newspapers are no
longer monopolies; they have lost their pricing f lexibility.
Even so, Buffett is convinced that the Post is in better shape than
other media companies. There are two reasons for his optimism. First,
the Post’s long-term debt was more than offset by its cash holdings.
The Washington Postis the only public newspaper that is essentially
free of debt. “As a result,” explains Buffett, “the shrinkage in the value
of their assets has not been accentuated by the effects of leverage.”^10
Second, he notes, the Washington Post Company has been exception-
ally well managed.
Figure 6.1 The Washington Post Company dividend per share.