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Washington Post: Why didn't Buffett buy it?

August 6, 2013: 5:00 AM ET

Despite his recent acquisitions, Warren Buffett may not be as optimistic about the future of print as some people think.

130718131105-warren-buffett-berkshire-atlantic-city-newspaper-620xaFORTUNE -- With the sale of the Washington Post, Warren Buffett is once again showing the limits of his love affair with newspapers.

Warren Buffett's Berkshire Hathaway (BRKA) is the largest outside investor in The Washington Post Co. (WPO) and has held the stock for four decades. Berkshire holds just over 1.7 million shares. The sale of the flagship paper to Amazon (AMZN) CEO Jeff Bezos pushed the value of Buffett's holding in the company up $45 million in after-hours trading on Monday.

But Berkshire's overall gain is far bigger than that. Buffett first began buying shares back in 1973. In 2008, Berkshire in its annual report said the position was worth $674 million and had a cost basis of $11 million. After the sale, Buffett's stake is now worth about a billion.

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So if past performance is an indication of future gains, you would think Buffett's heart for newspapers just grew a little fonder. And indeed, Buffett has been talking a lot recently about how much he likes newspapers, and he has bought about 30 daily newspapers in the past two years.

But Buffett hasn't added to his stake in The Washington Post Co. in a long time. The oldest financial disclosure you can get for Berkshire Hathaway online is from 1999. Back then, the company owned 1.7 million shares of The Washington Post Co., which is the same as now.

And The Washington Post Co. said its bankers approached six other potential buyers before making a deal with Bezos, who is buying the paper personally. Given Buffett's long history with the company and the fact that he has been buying papers recently, it's not a stretch to assume Buffett was in that group of people who passed. At the very least, it's likely that Donald Graham, the Post's CEO, ran the sale past Buffett and that the billionaire agreed it was time to let the storied paper go. Buffett declined to comment on the paper's sale.

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Despite his newspaper buying spree, Buffett has avoided the nation's biggest dailies. Earlier in the year, Buffett said he wasn't interested in buying the group of papers owned by the Tribune Co., which includes the Chicago Tribune and the Los Angeles Times, which appear to be on the block. Buffett has said he sees value in newspapers in tight-knit communities that specialize in local news.

Still, you might have expected Buffett to make an exception for The Washington Post given his long history with the paper. The problem doesn't seem to be price. On average, Buffett has been paying about $500 per customer for the papers he has bought. Bezos is paying about the same amount -- $520 per customer of the flagship paper -- but he is also getting a few smaller papers in the deal, which would bring down his cost per subscriber number. So that was well in Buffett's range.

Instead, it appears it really came down to whether Buffett thought the business of owning one of the most most influential papers in the country, with its large staff and taste for expensive investigative stories, is a good business. It appears Buffett's assessment was no.

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About This Author
Stephen Gandel
Stephen Gandel

Stephen Gandel has covered Wall Street and investing for over 15 years. He joins Fortune from sister publication TIME, where he was a senior business writer and lead blogger for The Curious Capitalist. He has also held positions at Money and Crain's New York Business. Stephen is a four-time winner of the Henry R. Luce Award. His work has also been recognized by the National Association of Real Estate Editors, the New York State Society of CPA and the Association of Area Business Publications. He is a graduate of Washington University, and lives in Brooklyn with his wife and two children.

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