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Blue Chip Stamps

A trading stamp company that became a major Berkshire affiliate, eventually merging into Berkshire and bringing See's Candy and Wesco Financial into the fold.

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Blue Chip Stamps

Blue Chip Stamps was a trading stamp company that became a major Berkshire affiliate through Buffett's partial ownership. Over time, Blue Chip acquired controlled stakes in Wesco Financial and See's Candy Shops, eventually merging into Berkshire Hathaway in 1978.

Overview

Metric Value
Business Trading stamps (savings stamps)
Berkshire Stake ~58-60% (by 1978)
Major Subsidiaries See's Candy, Wesco Financial
Affiliated with Berkshire Hathaway

Why It Mattered

The Cigar Butt Strategy

Blue Chip exemplified Buffett's early "cigar butt" investing:

  • Bought at deep discounts to intrinsic value
  • Controlled valuable affiliates
  • Earned high returns on invested capital

Key Affiliates

Blue Chip controlled or held major stakes in:

Company Ownership Business
See's Candy Shops 99% Candy/confectionery
Wesco Financial 80% Savings & Loan
Diversified Retailing Company Various Retail

The Merger (1978)

December 1978 Merger

On December 30, 1978, Diversified Retailing Company (Blue Chip's parent) merged with Berkshire Hathaway:

  • Berkshire acquired ~58% of Blue Chip
  • Blue Chip's affiliates became direct Berkshire holdings
  • See's Candy and Wesco came under Berkshire umbrella

This transformed Berkshire from a textile company into a financial/insurance conglomerate.

See's Candy Growth

The Treasure

Under Blue Chip ownership (and later Berkshire), See's Candy grew dramatically:

Year Pre-Tax Earnings
1972 $4.2M
1977 $12.6M

This 3x growth demonstrated See's pricing power and the "See's Candy Principle" for evaluating acquisitions.

Famous Quotes

"Blue Chip Stamps was a wonderful business that we acquired at an attractive price."

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