If you can find a business which is investing in building relationships that are based on seamless web of deserved with its customers, suppliers, vendors, shareholders, and employees, you’ve found a business with a strong moat. A moat which is hard to identify with numbers and hence not visible to Mr. Market.
On January 3, 1972, Warren Buffett acquired See’s Candy business for $25 million. This acquisition has an interesting backstory. The first time when an investment advisor approached Buffett for See’s Candy, he showed no interest. Buffett was in Nebraska. See’s Candy was in California.
“The candy business?”, Buffett squirmed, “I don’t think we want to be in the candy business.”
Fortunately, Buffett’s partner Charlie Munger lived in California and he was familiar with See’s Candy brand. On Munger’s advice, Buffett agreed to negotiate. Coming from the Benjamin Graham school of thought, Buffett was reluctant to buy See’s at the asking price. But Munger nudged him in the direction of paying up for quality.
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