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Warren Buffett buys a factory in Pilsen and elsewhere for $37.2 billion

Warren Buffett is a rich guy who has made lots of money. At the end, it seems to me that he's buying rather conventional companies he considers undervalued. Sometimes he's "strongly right" and the profit from the growth of these undervalued companies is usually capable of overcompensating the losses from the bets where he was wrong.

Years ago, I didn't quite realize the proximity. But now I believe that if I were doing similar business as Buffett, with similar amounts of money, I may pick a similar approach, too.



Rolls-Royce Trent 500, the competition-less engine optimized for Airbus A340 family, a PPC CZ product

His tastes may have been conservative – and could even say old-fashioned. He has made some recent bets on coal, railways, and other things. Days ago, he made the biggest purchase in his career so far: he bought the Portland, Oregon-based Precision Castparts Corporation (PCC) for $37.2 billion.




This company owns about 150 plants employing 27,000 employers in the world and one of them is in my hometown of Pilsen. PCC CZ is located in the industrial and academic zone of Bory [Pine Village], Southern (formerly: "Imperial") suburb of Pilsen.




Pilsen has so much industry of diverse types that it may be puzzling why the local citizens are not richer than Monaco yet. The well-known breweries and Škoda Works (not to be confused with Škoda Auto which only shared the owners with Škoda Works between 1925 and 1945), which used to be Austria-Hungary's #1 industrial corporation and is getting cured nicely these days (they just purchased a Finnish competitor a week ago), are located at the traditional historical places close to the city center.

However, Pilsen and its immediate vicinity has lots of related industry. Pilsen-Božkov, a Southeastern suburb of Pilsen, hosts Stocks Spirits, the main domestic producer of drinks such as the domestic rum, fernet, and many others. And just a few miles further to the East, in Starý Plzenec (Old Pilsner Seed, this is the city that would be called Pilsen before our "New Pilsen" was established in 1295), boasts Bohemia Sekt, the dominant producer of Champagne-like sparkling wines in Czechia (about 80% of the market, if counted by liters).

And then we have the industrial zone of Bory.

For the students, it's primarily the new campus of the regional University of Western Bohemia. The buildings are modern and work. The very concept of a "campus" was something unusual in the Czech lands, up to the end of communism. University buildings used to be chaotically scattered across the cities and the "campus" idea was only being imported to Czechia some 25 years ago.

Another famous object in the Bory suburb is the creative architecture, 8-winged prison, perhaps the most important prison in Czechia. Václav Havel has spent a few years over there, too. If something should be named after Havel, it's not the Prague International Airport – Havel hated flying – but the prison in Pilsen. ;-)

The campus is continuously connected to the industrial zone of Bory; look at the map. Panasonic CZ (producing TVs etc.) is still widely believed to be the most important company in this industrial zone. But is it really the #1?

When you look at the street names in this part of Pilsen, you won't have doubts that this is not a historical center of the Czech city. The names include University Street, Next to the Airport Street, Street Near Panasonic, Entrepreneur Street, Business Street, Morse Street, Daimler Street, and Tesla Street.

One of the boring cubic flat industrial buildings in the area is PPC CZ so it currently belongs to Warren Buffett. Locally, it looks like Warren has bought a totally random building in the Pilsen's new industrial zone. And you would ask: How it's possible for him to outperform the market if he's buying random companies at random places? But maybe it's just an illusion.

PPC is making metallic parts found in almost all airplanes that are flying in the world. Consumers include Airbus, Boeing, GE, Rolls-Royce, and others. PPC CZ is tooling and nondestructively testing rotational parts of motors for Rolls-Royce, ITP, Snecma, GE, Pratt & Whitney, MTU, Siemens, Kawasaki. These diverse connections and the belief about the "inertia" of the industry would make me believe that it's a rather safe choice to buy such a company.

At any rate, the finances hiding in these companies seem amazing to me. Note that Buffett paid $37.2 billion and the company only has 27,000 employees. So if you divided the money to the employees, which is what the Marxists would find natural ;-), each worker would get over $1 million from Warren. It's not bad! Well, the counting was even better at Harvard. With a colleague, we were planning to abolish Harvard University and divide the $35 billion endowment among the less than 5,000 academic stuff. That would be $7 million per professor – even better. ;-)

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