Why, then, might he have bought GEICO, a company admittedly perking along just fine without him, especially considering the acquisition premiums. In view of the increase in share price, it is likely Buffett was relying on the target's pre-existing stock price inadequately reflecting the value of the firm's resources and its prospects. This has been called hubris by some analysts, but it is hubris only if it fails. In the case of Buffett, it did not fail.

In fact, Buffett may have been operating from a position of having identified one or mor

In fact, Buffett probably expected to eliminate inefficiencies in the target company and/or increase its market share. When he took over The Buffalo News, a daily in upstate New York, he increased the news hole, a maneuver that would necessarily decrease the advertising page count. His contrarian move worked, however, because the news hole "attracts a wide spectrum of readers and thereby boosts penetration. High penetration, in turn, makes a newspaper particularly valuable to retailers since it allows them to talk to the entire community through a single megaphone" (Buffett, quoted by Henry, 1998, p. 58).

Buffett's problem with GEICO might be characterized as the lack of significant problems. When he became involved with Salomon Brothers, however, it was a far different story. That firm had suffered a scandal in which the firm's chief trader of U.S. debt instruments had cheated in Treasury auctions, a move that threatened Salomon's core business (U.S.

Some common words found in the essay are:
Hathaway GEICO, Hambrick Hayward, Salomon Brothers, Champion Sigler, Warren Buffett, Champion International, Buffett GEICO, Brothers Treasury, GEICO Poor, Andrew Sigler, 1992 n/a, salomon brothers,
Approximate Word count = 649
Approximate Pages = 3 (250 words per page double spaced)