Nebraska Furniture Mart

Nebraska Furniture Mart (NFM) is a legendary American home furnishings retailer, famous for its colossal stores and “sell cheap and tell the truth” philosophy. While a household name in the Midwest, for investors, it represents a quintessential case study in what makes a truly great business. Founded in 1937 by the indomitable Rose Blumkin (“Mrs. B”) with a meager $500 loan, NFM grew into the largest home furnishings store in North America. Its story became investment folklore when Warren Buffett acquired it for Berkshire Hathaway in 1983 in a famously simple deal. Buffett didn't just buy a store; he bought a fortress-like business model built on ruthless efficiency, enormous scale, and a fanatical dedication to offering the lowest prices. For a value investor, NFM is a masterclass in understanding a durable moat, the critical importance of management quality, and the power of a simple business executed with genius. It demonstrates that spectacular returns can be found not in complex technologies, but in selling everyday items better than anyone else.

The story of Nebraska Furniture Mart is inseparable from its founder, Rose Blumkin. A Russian immigrant who couldn't read or write English, Mrs. B built an empire from a basement in Omaha, Nebraska. Her philosophy was deceptively simple but brutally effective: “Sell cheap and tell the truth.” She understood that by offering the lowest possible prices, she could generate massive sales volume, which in turn gave her more purchasing power with suppliers to demand even lower costs. This created a virtuous cycle that competitors found impossible to break. Mrs. B was a force of nature. She worked tirelessly, negotiated fiercely, and was known for her uncanny ability to size up customers and products. She famously ran the business until she was 103, even competing with her own family by opening a rival store across the street after a dispute—a store that was, of course, wildly successful and eventually bought by NFM. Her life's work is a testament to how an owner-operator with an “all-in” mindset can create immense, long-lasting value.

In 1983, Warren Buffett made one of his most celebrated acquisitions. He bought a 90% stake in Nebraska Furniture Mart for approximately $55 million. The deal itself is legendary. It was sealed with a handshake and a simple one-and-a-half-page contract, with no audited financials or investment bankers involved. Buffett simply trusted Mrs. B and her son, Louie, and recognized the undeniable quality of the business they had built. He knew their reported numbers were honest and their business practices were sound. Buffett’s admiration for NFM was boundless. He famously quipped, “I’d rather wrestle a grizzly bear than compete with Mrs. B and her family.” For him, NFM was a “dream” investment for several key reasons.

NFM's moat is a textbook example of a cost advantage. It is not built on patents or fancy technology, but on a culture of extreme low-cost operations.

• Scale and Purchasing Power: NFM's massive flagship store in Omaha is a “destination” that draws customers from several states. This immense volume gives it unparalleled buying power with manufacturers, allowing it to secure prices no smaller competitor can match.
• Efficiency: From the warehouse to the showroom floor, the entire operation is optimized for low overhead. This efficiency is a core part of the company's DNA, passed down from Mrs. B.
• Customer Loyalty: By consistently offering the best prices, NFM built a fiercely loyal customer base. Generations of families in the region wouldn't consider buying furniture anywhere else. This reputation is a powerful, self-reinforcing asset.

The NFM story is more than just a charming tale; it's a treasure trove of enduring investment principles. For ordinary investors looking to apply a value-oriented approach, the key takeaways are clear and powerful.

• Look for simple, understandable businesses. You don't need to be a tech wizard to be a great investor. NFM sells tables, chairs, and carpets. Buffett understood the business model in minutes, but he also saw its brilliance. Stick to your circle of competence.
• Management is paramount. Buffett bought NFM because he trusted and admired the Blumkins. Look for companies run by honest, passionate, and talented people who treat shareholders' money as their own.
• A strong moat is everything. A business that can't defend itself against competitors is a fragile one. NFM's low-cost moat has allowed it to thrive for decades. Always ask: “What prevents someone else from doing this better or cheaper?”
• Focus on value, not just price. Buffett didn't need a complex valuation model to know he was getting a great deal. He understood the business's long-term earning power and its dominant position. He bought a wonderful company at a fair price.
• Trust, but verify (with character). While a handshake deal is rare today, the principle holds: investing alongside people of high integrity reduces risk immensely. The best partnerships are built on trust, not just on exhaustive due diligence.