65CASE IN POINT
BENJAMINMOORE, 2000In November 2000, Warren Buffett and Berkshire Hathaway
paid about $1 billion for Benjamin Moore & Co., the Mercedes
of paint companies. Founded in 1883 by the Moore brothers in
their Brooklyn basement, Benjamin Moore today is f ifth largest
paint manufacturer in the United States and has an unmatched
reputation for quality.
It was reported that Buffett paid a 25 percent premium over
the stock’s then current price. On the surface, that might seem
to contradict one of Buffett’s iron-clad rules: that he will act
only when the price is low enough to constitute a margin of
safety. However, we also know that Buffett is not afraid to pay
for quality. Even more revealing, the stock price jumped 50
percent to $37.62 per share after the deal was announced. This
tells us that either Buffett found yet another company that was
undervalued or else that the rest of the investing world was bet-
ting on Buffett’s acumen and traded the price up even higher—
or both.
Benjamin Moore is just the sort of company Buffett likes.
The paint business is nothing if not simple and easy to under-
stand. One of the largest paint manufacturers in the United
States and the tenth largest specialty paint producer, Benjamin
Moore makes one of the f inest, if not thef inest, architectural
paint in the United States. The company is not just famous for
the quality of its paint, however; architects, designers, and
builders regard Benjamin Moore colors as the gold standard for
their industry. In fact, the company developed the f irst com-
puterized color matching system, and it is still recognized as the
industry standard. With roughly 3,200 colors, Benjamin Moore
can match almost any shade.
Buffett also tends to buy companies that have a consistent
operating history and as a result, upon buying a company, he
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