If you asked me to name one of my favorite Berkshire Hathaway shareholder letters, the 2007 letter would come to mind instantly. It’s not just because of Warren Buffett’s timeless financial wisdom but because it dives into the details of See’s Candies—one of my favorite stores. (Who doesn’t love a place that hands out free samples?) The way Buffett describes See’s makes it feel like I’m sitting across from him in his Omaha office, chatting over chocolates about how a simple business can yield such extraordinary results.

Buffett’s folksy tone shines in this letter. He doesn’t just deliver dry financials; he paints a picture, even throwing in a cheeky biblical reference. When he mentions Berkshire's unofficial motto—“be fruitful and multiply”—I can almost hear the playful twinkle in his voice. It’s a subtle nod to Adam and Eve, underscoring See’s ability to “multiply” profits for Berkshire with minimal intervention. This lighthearted touch makes the financial insights feel relatable, accessible, and even fun.

Buffett bought See’s Candies in 1972 for $25 million, back when it was a modest operation bringing in $30 million in annual sales. Fast forward to 2007, and See’s was generating a whopping $383 million in sales, with pre-tax profits of $82 million. This exponential growth is impressive on its own, but what’s truly remarkable is how little capital See’s has required to achieve it. Over the decades, only an additional $32 million was reinvested to sustain and slightly expand the business.

Here are some unique aspects of See’s Candies’ business model that Buffett highlights:

Cash Business with No Accounts Receivable: Unlike many companies that rely on credit sales, See’s operates almost entirely on cash transactions. This means it doesn’t have accounts receivable sitting on the balance sheet, reducing financial risk and improving cash flow.

Minimal Inventory Due to Short Product Cycle: With a product cycle that moves quickly from manufacture to sale, See’s doesn’t have to hold large quantities of inventory. This minimizes storage costs and the risk of unsold goods. It’s a lean operation with an efficient supply chain, perfectly suited for its type of product.

High Returns on Invested Capital: From the get-go, See’s was generating around 60% returns on its invested capital. And, over the years, this percentage has held steady, with Berkshire reaping the rewards through dividends. Essentially, See’s has been a cash cow for Berkshire, generating millions in earnings without needing significant reinvestment to fuel growth.

Buffett uses See’s Candies as a prime example of the type of business he loves most: high-return, low-capital-requirement businesses. He classifies businesses into three categories:

High-ROIC Businesses with Low Capital Requirements: These companies generate strong returns without needing much reinvestment (Return on Invested Capital-ROIC). They allow excess profits to be reinvested in other ventures. See’s Candies falls squarely into this category, as it continues to produce cash that Buffett can use to buy more businesses or expand Berkshire’s existing portfolio.

Capital-Intensive Businesses with Adequate Returns: These businesses require regular capital to grow but still produce reasonable returns. While they can be profitable, they don’t generate the kind of “free” cash flow that Buffett treasures.

High-Growth, Capital-Hungry Businesses: These fast-growing companies demand massive capital infusions and produce uncertain or low returns. They may have promise, but their appetite for cash makes them risky investments, and their returns are often inconsistent.

Why See’s Is a Dream Business

Buffett’s admiration for See’s Candies is clear. This isn’t a high-growth tech company or a trendy startup—it’s a simple, well-run candy business. But See’s generates the kind of returns that many companies can only dream of. Its high ROIC combined with its low need for additional capital make it the ultimate “cash machine.” It allows Buffett to take the profits and reinvest them in other ventures without having to funnel more money back into See’s.

The 2007 Berkshire Hathaway letter is a gem not just for its financial wisdom but for the character and warmth Buffett brings to his descriptions. I walked away from this letter with a deeper appreciation for See’s Candies—not only for its iconic chocolates but for its exemplary business model. As an investor, it’s rare to find a company that combines high returns with low capital needs. For Buffett, See’s is a classic example of how a simple, well-managed business can generate lasting wealth with minimal effort—a dream for any investor.

If there’s one takeaway from See’s story, it’s this: sometimes, the best investments aren’t the flashiest. They’re the ones that, like See’s, quietly churn out cash year after year, letting investors enjoy the sweet rewards.