victor cedillo

WARREN BUFFETT: WE'LL NEVER INVEST IN NIKE Warren Buffett was asked about Nike in 1994 and said he didn’t understand it. The shoe company he did understand cost Berkshire $19 billion. In the video below, a shareholder asks him about the future prospects of Nike and Reebok. 7 months earlier, Berkshire had bought Dexter Shoe of Maine for $433 million. He didn’t pay cash. He paid in 25,203 Class A shares, 1.6% of Berkshire. Dexter made 7.5 million shoes in 1993. 65% of them in Maine. No debt. Buffett wrote that it needed no fixing. Then the Nike question. “I don’t understand their competitive position and the likelihood of permanence of their competitive position over a 10 or 20-year period, as well as I think I understand the position of Brown and Dexter.” “Charlie and I don’t like difficult problems,” he says. “We’d rather multiply by 3 than by pi.” Munger has a rule about numbers a seller hands you. They were once given $2 million worth of projections along with a business. They wouldn’t open the book for free. “Don’t ask the barber whether you need a haircut.” Dexter’s profits dropped in 1995. By 1999, 93% of shoes sold in America were made overseas. In 2001 the Maine factory closed and the rest was folded into H.H. Brown. “What I had assessed as durable competitive advantage vanished within a few years,” Buffett wrote in 2007. “To date, Dexter is the worst deal that I’ve made.” Those 25,203 shares are worth about $19 billion today. Nike rose 60% in 1994. Then 94% in 1995. It kept running for 27 years, to $179 in 2021. This month it trades near $35, down about 80% from that peak, Greater China off 22%, revenue guided down again. Buffett said he couldn’t see 20 years into the shoe business. He was right. He just aimed the doubt at the wrong company. Nike $NKE is back at a 52-week low. Would you buy it, or is this Dexter all over again?