Finance History | Washington Post Building, 31 December 1974 — A US$10.6 Million Stake Fell While Business Value Grew

On 31 December 1974, Berkshire Hathaway's Washington Post Company holding had a market value of approximately US$8 million in 1974 dollars, about 25 percent below its US$10.6 million cost in 1973 dollars. Berkshire had bought its entire position in mid-1973, when the newspaper company's total stock-market valuation was roughly US$100 million in 1973 dollars. Berkshire estimated the enterprise itself was worth US$400 million to US$500 million in 1973 dollars, so the shares traded at no more than one-quarter of estimated per-share business value when purchased. The subsequent decline did not reflect a comparable deterioration in the operating business. Berkshire's later account said the company continued performing well through 1973 and 1974 while intrinsic value increased. That divergence illustrates a central distinction in equity investing: a quoted share price records the price of a transaction, while business value depends on the cash-generating capacity and competitive position of the enterprise behind the shares. An investor can therefore be correct about a company's economics and still show a substantial interim loss if other market participants become more pessimistic. The position also imposed an opportunity cost. Capital committed to the newspaper could not be redeployed without selling at the depressed price, and there was no contractual maturity forcing the market to recognize Berkshire's appraisal. Washington Post management later repurchased shares at low prices, reducing the number of claims on the company and increasing each continuing share's proportional ownership when purchases occurred below intrinsic value. By 1985, Berkshire still held the shares it had bought in 1973 except for a proportionate redemption, demonstrating that patience mattered only because the underlying business and management continued creating value. The former Washington Post building at 1150 15th Street anchors the mark-down to the newspaper enterprise itself. The site represents a year when a US$10.6 million investment in 1973 dollars looked worse on a brokerage statement even as Berkshire judged the business beneath it to be growing more valuable. Photo: Daniel X. O'Neil, CC BY 2.0, via Wikimedia Commons.