Personal Profile Warren Buffett graduated from the University of Nebraska in 1950 with a Bachelor of Science degree. After reading The Intelligent Investor by Benjamin Graham, he wanted to study under Graham, and did so at Columbia University, obtaining his Master of Science degree in business in 1951. He then returned to Omaha and formed the investment firm of Buffett-Falk & Company, and worked as an investment salesman from 1951 to 1954. During this time, Buffett developed a close relationship with Graham, who was generous with his time and thoughts. This interaction between the former professor and student eventually landed Buffett a job with Grahams New York firm, Graham-Newman Corporation, where he worked as a security analyst from 1954 to 1956. These two years of working side-by-side with Graham and analyzing hundreds of companies were instructive years that formed the foundation for Buffetts approach to successful stock investing. Wanting to work independently, Buffett returned home once again to Omaha and started a family investment partnership at age 25 with a starting capital base of $100,000. From 1956 to 1969, when the Buffett partnership was dissolved, investors, including Buffett, experienced a thirty-fold gain in their value per share. Prior to the final decision to liquidate the partnership, Buffett had acquired the unprofitable Berkshire Hathaway textile company in New Bedford, Massachusetts, in 1965. After acquiring Berkshire, Buffett effected a successful turnaround of the company, which focused on changing the companys financial framework. Berkshire kept its textile business, even in the face of mounting pressures, but also used the company as a holding company for other investments. It was in the 1973-74 market collapse that Berkshire got the opportunity to purchase other companies at bargain prices. Buffett went on a buying spree, which included an investment in The Washington Post. The rest is history and today, Berkshire Hathaway is a massive holdings company for a variety of businesses with assets and sales totaling, approximately, $240 billion and $100 billion, respectively, for year-end 2006. Investment Style Warren Buffetts investing style of discipline, patience and value has consistently outperformed the market for decades. John Train, author of The Money Masters(1980), provides us with a succinct description of Buffetts investment approach: The essence of Warrens thinking is that the business world is divided into a tiny number of wonderful businesses – well worth investing in at a price – and a large number of bad or mediocre businesses that are not attractive as long-term investments. Most of the time, most businesses are not worth what they are selling for, but on rare occasions the wonderful businesses are almost given away. When that happens, buy boldly, paying no attention to current gloomy economic and stock market forecasts. Buffetts criteria for wonderful businesses include, among others, the following: They have a good return on capital without a lot of debt. They are understandable. They see their profits in cash flow. They have strong franchises and, therefore, freedom to price. They dont take a genius to run. Their earnings are predictable. The management is owner-oriented. Publications Buffett has not, as yet, authored any books. However, his annual letters to the shareholders in Berkshire Hathaways annual report are a suitable substitute. Back copies of these 20-page masterpieces of investing wisdom are available from 1977 through 2006 (updated annually) from Berkshires Website. Buffett: The Making of an American Capitalist by Roger Lowenstein (1996). Warren Buffett Speaks: Wit And Wisdom From The Worlds Greatest Investor (1997) The Warren Buffett Way by Robert G. Hagstrom (2005) Quotes Rule No.1 is never lose money. Rule No.2 is never forget rule number one. Shares are not mere pieces of paper. They represent part ownership of a business. So, when contemplating an investment, think like a prospective owner. All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies. Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it. If, when making a stock investment, youre not considering holding it at least ten years, dont waste more than ten minutes considering it. Next: The Greatest Investors: David Dreman » Table of Contents Greatest Investors: Introduction The Greatest Investors: John (Jack) Bogle The Greatest Investors: Warren Buffett The Greatest Investors: David Dreman The Greatest Investors: Philip Fisher The Greatest Investors: Benjamin Graham The Greatest Investors: William H. Gross The Greatest Investors: Carl Icahn The Greatest Investors: Jesse L. Livermore The Greatest Investors: Peter Lynch The Greatest Investors: Bill Miller The Greatest Investors: John Neff The Greatest Investors: William J. ONeil The Greatest Investors: Julian Robertson The Greatest Investors: Thomas Rowe Price, Jr. The Greatest Investors: James D. Slater The Greatest Investors: George Soros The Greatest Investors: Michael Steinhardt The Greatest Investors: John Templeton The Greatest Investors: Ralph Wanger
Posted on: Tue, 05 Nov 2013 18:27:34 +0000
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