Warren Buffett's Best Investment Ever

Berkshire Hathaway  (NYSE: BRK-A  ) (NYSE: BRK-B  ) has been a huge winner for its long-term shareholders. Between 1965 and 2012, the per-share book value of Berkshire has grown 586,817% (no, that's not a typo). 

We can chalk a healthy chunk of those outsized returns up to the capital allocation and investing prowess of Berkshire's CEO, Warren Buffett. Over the years, Buffett has made a lot of impressive investments on behalf of Berkshire shareholders; but is it possible that one investment could be slapped with the superlative "best?"

To find out, I asked five of our Foolish analysts to weigh in.

Dan Dzombak: In two delicious words: See's Candies.

Berkshire Hathaway purchased See's Candies in 1972 for $25 million. For those unfamiliar with the company, See's is the dominant boxed chocolate company on the West Coast. Buffett has called See's a "dream business" in that the company is a market leader, has greJat customer loyalty and pricing power, and doesn't take much invested capital. That means that most, if not all, of the profits flow back to Berkshire.

Financially, See's Candies has been a great investment -- it had returned over 2,000% by 2006. However, I believe See's Candies is Buffett's best investment ever because it changed his mind-set from only buying undervalued companies to realizing that it's okay to pay up for a great business.

As Buffett said in an interview with Fortune last year:

We have made a lot more money out of See's than shows from the earnings of See's, just by the fact that it's educated me, and I'm sure it's educated Charlie, too.

Buffett has also said it taught him about the power of brands. The education provided by See's has profited Berkshire immensely over the years, thanks to this interest in great brands. Look no further than Berkshire's stake in Coca-Cola  (NYSE: KO  ) and GEICO as evidence.

(Dan can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak.)

John Divine: Picking Warren Buffett's best investment is like being asked to choose the best book ever written -- I think we can only choose our favorites.

That said, one investment Buffett made less than two years ago in the wake of the financial crisis shows Buffett at his finest. In September 2011, Berkshire Hathaway invested $5 billion in Bank of America (NYSE: BAC  ) . It wasn't just an investment, but a vote of confidence in B of A at a time when markets were fretting over the bank's balance sheet. Not only did the preferred shares Buffett got in return pay a cool $300 million a year in dividends, but when they're redeemed, Berkshire will get a 5% premium for them. 

But here's the best part: Berkshire also has the right to buy 700 million shares of common stock at about $7.14 a pop -- anytime before 2021. At today's prices, the deal has already netted Berkshire about $3.6 billion on paper, excluding dividends and the redemption premium. The deal shows the absurd level of respect Buffett has earned from his decades of inhuman returns. No longer does his backing merely attract attention to a stock; it actually validates the underlying company.

Robert Eberhard: There are plenty of choices available when considering Buffett's best investment ever. However, I'm going to look beyond companies he's purchased, and talk about the investment he made in himself nearly 60 years ago.

Buffett was a great admirer of Benjamin Graham and David Dodd, two investment analysts who had great success, even during the Great Depression. Because of this admiration, Buffett left the comfort of Omaha in 1950 and went to New York, to study under both at Columbia Business School. He graduated with a degree in economics, and returned to Omaha to work for his father as a stockbroker.

Columbia was only part of the investment Buffett made in himself, however. Graham soon offered Buffett a position at the Graham-Newman partnership. For nearly two years, Buffett learned at the hip of one of the most successful investors ever, eventually returning to Omaha to start up his own investing partnership when Graham closed his down. It's hard to say if Buffett would be as successful today without three years of mentorship from Ben Graham, but I'm sure that it didn't hurt.

Dan Caplinger: Buffett's best investments have taken full advantage of his reputation, and the impact his moves have on the investing community. My pick for the top candidate is one that hasn't yet fully paid off: His $5 billion investment in Bank of America back in late 2011.

 

At the time, B of A was struggling under the market's perception that it needed to raise capital and, despite its denials to the contrary, the bank needed to make a move to gain confidence. With Buffett having made similar moves during 2008 with other blue-chip companies exposed to the financial crisis, it was a natural fit for B of A to go to him. Preferred stock yielding 6% is quite a bit more attractive than the 0.3% yield that common shareholders are getting right now, but the real clincher was the equity kicker Buffett got in the form of 700 million 10-year warrants -- warrants that he can exercise at a price that's now $5 less than the prevailing market price. These deals aren't without risk, but Buffett gets terms that make them attractive despite the risks involved.

 

Chuck Saletta: Beyond a shadow of a doubt, Buffett's best ever investment is the very company he has called his worst investment -- Berkshire Hathaway. While it's absolutely true that on a rate-of-return basis, Berkshire's textile mills were a lousy investment for that otherwise master investor, that investment did give Buffett his position as CEO of an operating company.

There's a famous Buffett quote painted on a conference room wall at Fool Headquarters: "I am a better investor because I am a businessman, and a better businessman because I am an investor." Were it not for the Berkshire Hathaway acquisition that made Buffett not only an investor, but the CEO of an operating company, he may never have gotten that cross-training experience. On a dollars-and-cents basis, it may have been a lousy investment, but from an educational perspective, it was unbelievably valuable.

Heading to Omaha
On May 4, Berkshire Hathaway will be holding its epic annual meeting in Omaha, and the Fool will be there to bring you everything you need to know from this "Woodstock for Capitalists." Simply click here to follow along with all of the Fool's coverage.