Background
Warren Edward Buffette was born on 30th August 1930 in Omaha, Nebraska; he is frequently referred to as the ‘Sage of Omaha’ or the ‘Oracle of Omaha’. He is American and is an investor, a businessman and also a philanthropist.
Buffette has accumulated a huge fortune from his continuous shrewd and well-calculated investments over the years, Buffet’s investments are done and managed through his holding company called the ‘Berkshire Hathaway’, he of course is the largest shareholder and the CEO of the company. The company’s worth is estimated to be approximately 52 billion US dollars. Mr. Warren Buffette was classified as the second wealthiest person in the world by Forbes in September 2007. (The Free Dictionary, 2008)
Why is he so Successful; policies and strategies?
Warren Buffette, world’s second richest man, always treated his studies and investments seriously and thoughtfully, his belief was that investments should be looked after and maintained the same way a business is run and looked after.
Warren Buffette was the only pupil to have received an A+ in the entire 20 years of teaching by Benjamin Graham had years of teaching A+ ” in 20 years of teaching in his ‘security analysis class’.
Warren Buffette’s teacher Benjamin Graham there should be minimum of 100 stocks in an investor’s portfolio for safety and hence following this principle, Warren followed that rule in the beginning but later discovered that something was now quite right with that school of thought and he changed his style to a more concentrated style of investing where Warren would buy a few stocks and invest further in them after having done substantial research on each company Warren Buffette.
Buffette believes that people who invest in multiple companies are looking for easier options and want to make their lives easier by not doing their homework and investigating deeply how the investment would pay off. He thinks that if people only committed to ten business deals in their entire lives then those deals would be more profitable than numerous and uncountable deals in a lifetime of a person as those fewer deals would have more thought given to them before being carried out.
Mr. Buffette’s success can be judged by the fact that his portfolio has enjoyed an average increase of 23 percent every year for the past 32 years. He only invests and buys those companies that he will be proud to be the owner of and they should also have an efficient management, good earnings at the time of the purchase and the potential to maintain those earnings for further progression. Buffette loves the companies he decides to invest in and educates himself thoroughly on all aspects of the company, he usually doesn’t like to sell the stocks of any company that he invests in and usually wants to purchase the entire company like he has bought a lot of them for example SEES candy and many more.
Buffet is very dedicated and focused as a person and he gives a lot of importance to Benjamin Graham’s book and claimed that he would make no further investments until he read it a minimum of ten times and the book remains on his desk to the day!
Another secret of Buffette’s success is that he likes to get involved with companies that have predictable future earnings; this is so that he can work out the future worth of the companies and then work accordingly. Buffette is a worthy investor who has the knack of purchasing stocks at just the right time, when they are undervalued and he knows exactly when it is the right value to purchase them in!
Buffette built his huge empire by utilizing other peoples’ money in a limited partnership that had mo more than a hundred people. He took a 25% share of the profits in that partnership and that is exactly how he made himself into a billionaire. This of course was a great tactic and it paid off for Buffette but it took years for him to become that wealthy.
Buffette is to date the one and only billionaire in Forbes list of 400 wealthiest men of USA, who has made his entire fortune exclusively by investing in stocks.
Back in 1957, Buffette started a partnership with his friends and family, they all invested $105,000 in the partnership and at present it is estimated to be worth over $20 billion. (The Stock-Teacher.com, 2008)
Although his career has enjoyed immense success over the course of last 50 years and more, believe it or not Buffette was once a shy boy who took a Dale Carnegie course on public speaking. From there how he worked himself into the world’s 2nd wealthiest man is truly amazing and commendable.
Some of the f actor’s for Buffette’s success consists of his characteristic of being honest. He has always been aware of both his strengths and weaknesses, and made his business dealings according to. He was never ashamed to work along with his knowledge and by following his inner instincts and knowledge he is where he is today, truly as the market’s master.
Buffette has a great sense of humor, which keeps his spirits up and loves to laugh at his own limitations all the time, he has maintained his wit and humor over the stressful years of building up his wealth and empire. Of course he is always serious when it’s time to do business, but nothing could rob Buffette off his sense of humor and the ability to laugh in the face of whatever problems he encountered during the years.
Buffette always hated waste and excess of anything all through his long fruitful career and took it upon himself to set an example of a more economically balanced corporate America. Even though he has billions of dollars at his exposal, Buffette chose to live like any other regular American. He lived in a modest house, which he had purchased long ago, drove a normal and a modest car and choose to eat at McDonald’s. He appreciated and respected the worth of a dollar and worked hard in order to get that message across from his own from his company, on to his children and then ultimately to the rest of America and the rest of the world. Buffette was not in the business just for the money.
Buffette respected his employees, he considered all his employees as first-class workers, doing their individual jobs in a top-class manner. His employees were free to talk to him about the work as much or as little as they thought best. He appreciated the worth of good people and treated them with utmost respect, which they deserved. This type of consideration was not reserved for his employees but it was also extended towards other shareholders and last but not the least, the media.
Even though at times, the media considered him conservative and The Wall Street Journal said he was from another time, Buffette always followed his innermost instincts to guide him to the best business decisions ever and it really worked out for him so he never paid heed to useless criticism and always had trust in himself to pull him through any ordeal.
Buffette loves his life he loves what he does for a living and says he has arranged his life so that he can do what he wants to most of the time. Buffette still goes to work regularly and on a daily basis and is still the Chairman and CEO of Berkshire Hathaway, the company that he owns 40 percent of. But for the time being Buffette says he feels fantastic. (Evan Carmichael, 2006)
Buffette has he always knew he was going to make it big and be filthy rich. Buffette used his totally unique personality and an out-of-the-box management style to master the art of investing and to create his impressive empire. With a mere $100 of his own money and $105,000 from friends and family, Buffette created Buffette Associates, Ltd. in 1956. By the end of the year, he was managing over $300,000 in capital from a small office out of his new home. It was a lot of money, but for Buffette, it wasn’t enough.
Warren Edward Buffette grew up in Omaha, Nebraska along with his two sisters; Doris and Bertie. His mother’s name was Leila, and his father was called Howard Buffette, who was also a stockbroker and a Republican member of the U.S. House of Representatives. Buffette’s grandfather owned a grocery store, where the existing vice chairman of Berkshire Hathaway used to work with Buffette.
At the age of six, Buffette purchased 6 packs of Coca-Cola from the store of his grandfather’s. The purchase’s cost was 25 cents but he resold each bottle 5 cents. At the end of the whole episode Buffette had generated a profit of five cents and this was the start of the journey of making one smart decision after another in the world of business. The episode left him yearning for more and with one successful mission under his belt Buffette Buffette turned away from the playground in order to look for more fruitful and profit-generating deals.
At the age of 11 years, Buffette bought three shares of Cities Service for himself and also for his two sisters at $38 each. The stock of the company he invested in dropped down to $27 per share and even though he was somewhat afraid of the drop in value he held on to them. After some time, the stocks’ value bounced back and Buffette decided to sell his shares when their value was placed as $40. Although Buffette’s patience awarded him with some profit, he wasn’t patient to the point where his stocks generated a high profit on his stocks. The Cities Service’s stocks’ value later went up to a whopping $200.
All through high school, Buffette delivered newspapers and at the time of his graduation in 1947, he had a saving of well over $5,000 from his two paper routes. For $1,200 he went ahead and purchased 40 acres of farmland in Nebraska and rented to tenant farmers for generating profit. At 13, when he filed papers for his first-ever income tax return he subtracted his bicycle as a work expense.
At his father’s persistence, Buffette got himself enrolled in the Wharton Business School at the University of Pennsylvania. He never wished to go to college and only managed to be at Wharton’s for two years. He felt he knew more than his professors and moved back home and got transferred to the University of Nebraska in Lincoln. Buffette graduated in 3 years and during the duration of his degree he worked full-time.
After Buffette read Benjamin Graham’s book, ‘The Intelligent Investor’, he decided to apply to graduate school. Buffettee was turned down by Harvard Business School due to his age, he was considered too young and then he applied to Columbia Business School and there Graham taught Buffettee himself and Buffette went on to become the first student in the 20 years history of Graham’s security analysis class to have received an impressive A+. By 1951, Buffette had received his Master’s degree in economics and then his father’s brokerage as a salesman. After three years of working for his father, Buffette was hired by Graham’s investment firm but later on Buffettee left and went back to Omaha in 1956 when Graham retired. With a decent education and appropriate amount of experience, Buffette decided to fulfill his dreams all by himself. (Carmichael, 2006)
Berkshire Hathaway
In 1962, Buffette Partnerships started to purchase shares of Berkshire Hathaway which was a large manufacturing company in the textile industry and it was not doing too well and was selling for much less than its working capital.
In 1969, Buffette decided to dissolve all his other partnerships in order to focus all his attention on the running of Berkshire Hathaway., Charlie Munger, current Vice Chairman of Berkshire on that time said that buying the was a big blunder as the whole of textile industry was declining back then. But Berkshire went on to become one of the largest holding companies of the world. Buffette forwarded the company’s extra cash to obtain private businesses and stocks of public companies. He kept the insurance companies right in the heart of his strategy as due to the large cash reserves they could easily pay any future claims.
Buffette usually invests in wide-moat businesses that have become a hallmark for Berkshire Hathaway, especially when whole companies have to be bought instead of public stocks. Due to this strategy, the company is the owner of many big businesses that lead the industries they belong to. Those businesses are either dominant in different niche markets or have other outstanding features which give them the edge over the other players in the same industry. (The Free Dictionary, 2008)
As a Philanthropist
Almost two years back in June 2006, Buffettee committed himself to giving 83% of his wealth to charity to an organization known as Bill and Melinda Gates Foundation. This huge donation is of around $30 billion. Buffette’s donation is the largest donation to be made in the entire donation history of U.S.A. when the donation was made it was twice the size of the foundation’s worth at that time.
Buffettee is a modest and a humble man, who doesn’t believe in extravagance, his salary for the entire 2006 came to around $100,000, this amount is really small as compared to the salaries and benefits which other senior executive receive in other companies, which are similar to Buffettee’s. CEOs in S&P 500 constituent companies averaged around $9 million compensation in 2003 alone! Time Magazine listed Buffettee in their list of the 100 most influential people in the World. (The Free Dictionary, 2008)
Mr. Buffette is an honest and a civilized man, who has his heart in the right place. The views are quite liberal regarding social issues and have spent his money on various deserving causes. He leads a modest life in a home he purchased many decades back. Money doesn’t seem to be everything for Buffette.
There are no doubts about his abilities as an investor, he is very good at it, he has a way of earning huge sums of money, his success and actions of goodness have turned a lot of people into his fans and admirers. (Walsh, 2006)
References
David Walsh, ‘The philanthropy of Warren Buffette’, 2006, Web.
Evan Carmichael, ‘Investor’s Insight: How Buffette Created an Empire’, 2006, Web.
Evan Carmichael, ‘The Oracle of Omaha: Warren Buffette is Born’, 2006, Web.
The Free Dictionary, ‘Warren Buffette’, 2008, Web.
The Stock-Teacher.com, ‘Warren Buffette learned from Benjamin Graham’, 2008, Web.