Warren Buffett Gillette Investment (NYSE: G)
Warren Buffett Gillette Investment. Why Warren Buffett invested in Gillette (NYSE: G). Described as one of ‘The Inevitables’, this was one of Warren Buffett’s favorite investments.
The Gillette Company merged into Proctor & Gamble in 2005, but until then traded as an independent listed company on the New York Stock Exchange. The Gillette Company was a razor manufacturer, with dominant market share in the shaving market. Under the slogan ‘The Best a Man can Get’, it was a business with high return on invested capital. Products in its product line include Techmatic, Trac II, Atra, Gillette Sensor, Good News!, Custom Plus, Mach, Mach3 disposable, Mach3 Turbo, Venus (a female version of Mach 3), Gillette Fusion, among others.
Warren Buffett bought Gillette Preferred Stock
In 1989, Buffett purchased $600 million of Gillette preferred with 8.75% dividend, mandatory redemption in 10 years, and right to convert into common at $50 a share.
Buffett liked Gillette a lot and labeled it along with Coca-Cola as one of ‘The Inevitables’. This is a kind of business that Buffett likes to be in because it is easy to imagine what the business will look like in ten years. It fulfills a basic need that will always be there: regardless of what happens to the Internet, people will still need to shave.
Gillette is well-positioned to meet this need, as it is the dominant player in the shaving-equipment business with strong brand recognition that gives it a wide moat. This means that Gillette will be able to keep competitors away and continue to profit from supplying shaving equipment to meet this fundamental need that will not change over time. Businesses with a wide moat like Gillette’s are able to sustain supernormal returns that make them very attractive to long-term owners like Warren Buffett who are not concerned about the short term gyrations of the market and care much more about ‘owner earnings’.
