The Washington Post

The Washington Post Company is a famous American media and education company, best known for its flagship newspaper. However, in the world of value investing, it holds a legendary status as one of Warren Buffett's most brilliant and instructive investments. In 1973, through his holding company Berkshire Hathaway, Buffett invested approximately $10 million into the company when the market was gripped by pessimism. He saw what others missed: not just a newspaper, but a dominant media “franchise” with an unbreachable economic moat. The stock was absurdly cheap, trading at a fraction of what its individual assets were worth. Buffett's analysis and subsequent investment in The Washington Post have become a cornerstone case study for investors, beautifully illustrating the principle of buying wonderful companies at fair (or, in this case, wonderful) prices. The story is a masterclass in looking past short-term market sentiment to identify long-term business value.

In the early 1970s, the stock market was in the doldrums, and newspaper stocks were particularly unloved. Wall Street worried about the rise of television news and saw newspapers as a dying industry. The Washington Post Company's stock was trading at a market capitalization of around $80 million. However, Warren Buffett, a devoted student of Benjamin Graham, did his own homework. He looked at the company not as a flickering stock price but as a collection of business assets. He estimated that the company's properties—including its dominant newspaper, Newsweek magazine, and several highly profitable network-affiliated TV stations—could be sold off individually for at least $400 million. Buying the entire company for $80 million was, in his words, like buying a “$400 million business for $80 million.” The price-to-earnings ratio was a mere 4x. This huge gap between price and intrinsic value presented an enormous margin of safety. Buffett began buying shares aggressively, becoming the company's largest outside shareholder and a trusted advisor to its legendary leader, Katharine Graham.

What made The Washington Post such a fantastic business in Buffett's eyes? It was its powerful and durable competitive advantage. This wasn't just any company; it was what Buffett calls a “franchise.”

In the pre-internet era, a city's dominant newspaper was often a local monopoly. If you were a business in Washington D.C. and wanted to reach the widest possible audience through print, you had to advertise in The Washington Post. There was no effective second choice. This competitive dynamic gave the company incredible pricing power. It could raise its advertising rates year after year without fear of losing significant business.

Once the printing presses and distribution network were established, the business did not require massive ongoing investment to maintain its dominance or grow its earnings. Revenue from advertising and circulation flowed in, but very little of it had to be reinvested back into heavy machinery or equipment. This resulted in a gusher of free cash flow—the lifeblood of any great investment. This combination of high profitability and low capital expenditure is an economic model of rare beauty.

The story of Buffett's investment in The Washington Post offers timeless lessons for ordinary investors.

• Think Like a Business Owner: Don't get caught up in the market's daily mood swings. Analyze the stock as if you were buying the entire company. Ask yourself: Is this a good business? What are its long-term prospects? What are its assets really worth?
• Identify Durable Competitive Advantages: The most valuable asset a company can have is a moat—a structural feature that protects it from competition. This could be a strong brand, a network effect, a low-cost advantage, or, in the Post's case, a local monopoly.
• Price is What You Pay; Value is What You Get: The market was selling shares in the Post for a pittance. Buffett recognized the immense underlying value and acted decisively. The best opportunities often arise when a great business is temporarily unpopular.
• Patience is a Superpower: Buffett held his shares in The Washington Post for over 40 years. His initial $10.6 million investment grew to be worth over $1 billion, a return of roughly 100x. True wealth isn't built by frantic trading but by owning wonderful businesses for the long term.