Warren Buffett: The Global Capital Market Tycoon
Warren Buffett, the man we all know as the “Oracle of Omaha,” was born in Omaha, Nebraska, on August 30, 1930. Warren Buffett’s name certainly caught some attention inside and outside the financial services industry. His father was a man named Howard Buffett. Howard was a stockbroker and representative from the United States. Warren’s mother was named Leila Buffett. The young Buffett began working at his father’s brokerage house at the age of 11. It was around this time that he made the first purchase of his stock. Warren bought shares of a company called Cities Services for $38 each. He later sold Cities Services shares when the price hit roughly $40, only to see them skyrocket to $200 a few years later. This was a great learning for him and started believing in investing in good companies for long term. At the age of 14, he spent $1,200 that he had saved on two newspaper runs to purchase 40 acres of farmland that he later leased to tenant farmers.
The Wharton School at the University of Pennsylvania was where Warren Buffett initially completed his elementary education. Warren attended private boarding school Phillips Academy in Andover, Massachusetts for high school. After graduating from college, Buffett was drafted into the US Army and served as an infantryman during the Korean War from 1952 to 1954. Following his military service, Buffett attended Harvard University, where he received his bachelor’s degree in Business Administration. in 1954. Although, he went back to the University of Nebraska later on. There he began his interest in investing after reading The Intelligent Investor by Benjamin Graham. The two people often credited with inspiring Buffett to work in stocks are Benjamin Graham and Charlie Munger. He attended Columbia University and Harvard University and earned an MBA after his management training at the latter. He earned a master’s degree in economics from Columbia Business School, studying under Benjamin Graham, along with other future value investors including Walter Schloss and Irving Kahn.
Another major influence on Warren’s investment philosophy was well-known investor and writer Philip Fisher. When Warren scored only A+, Benjamin Graham handed out to a student in his stock analysis class, Buffett wanted to work at Graham-Newman, but was initially turned down. Instead, Warren went to work at his father’s brokerage firm as a manager until Graham offered him a position in 1954. Once again, Buffett came to Omaha two years later once Graham retired.
In 1956,Buffett established his first investment partnership Buffett Associates Ltd. It was financed with $100 from Buffett, the general partner, and $105,000 from seven limited partners consisting of family and friends of Buffett. Buffett created several additional partnerships that were later consolidated as Buffett Partnership Limited. He ran the partnerships from his bedroom, adhering closely to Graham’s investment approach and compensation structure. These investments exceeded 30% compounded annually between 1956 and 1969, in a market where the norm was seven to eleven percent. Buffett employed three strategies for his trade:
1) First, he looked for undervalued stocks that possessed a safety margin and met expected return-to-risk characteristics.
2) Moreover, he carefully observed company events that are not related to broader market changes, such as mergers and acquisitions, liquidation, etc.
3) Finally, he went out of his way to build sizable stakes, ally with other shareholders, or employ proxies to affect change in companies.
In 1962, Buffett Partnerships began buying shares in Berkshire Hathaway, a large manufacturing company in a declining textile industry that was selling below its working capital. Buffett would eventually dissolve all of his partnerships to concentrate on running Berkshire Hathaway. At the time, Charlie Munger, current vice president of Berkshire, commented that the purchase of the company was a mistake due to the failure of the textile industry. Berkshire, however, became one of the world’s largest holding companies, as Buffett redirected excess company cash to acquire private companies and shares of public companies. At the center of his strategy were the insurance companies, because of the large cash reserves (“float”) they must have available to pay future claims. Essentially, the insurance company does not own the float, but can invest it and keep any product.
Change of Strategy:
Under the influence of his friend and business partner Charlie Munger, Buffett’s investment approach moved away from a strict adherence to Graham’s principles and began to focus on high-quality businesses with lasting competitive advantages. He described such advantages as a “moat” that kept rivals at a safe distance, unlike commodity businesses, which sell undifferentiated products and face direct competition. A classic example of a broad-spectrum company is Coca-Cola, because consumers are willing to pay more for a Coke than for a generic drink with a similar taste. On the other hand, salt is considered a commodity because consumers generally have no preference for one brand of salt over another.
Investing in broad businesses has become a hallmark of Berkshire Hathaway, particularly when it buys entire companies rather than public shares. As a result, you now own a large number of businesses that are dominant players in their respective industries, specialize in various market niches, or possess other unique characteristics that set them apart from their competitors.
Warren Buffett also served as an executive at Berkshire Hathaway, which is a holding company he founded in 1965. Today, the company owns more than 60 businesses, including Geico insurance and Dairy Queen ice cream parlors. In addition to his work at Berkshire Hathaway, Buffett is also a member of the board of directors of several other companies. For example, he is a member of the Columbia Business School board of trustees, as well as the National Campaign Finance Board. In 2006 he co-founded the Giving Pledge campaign with Bill Gates and Warren Buffet’s promise that they will donate at least half of his wealth to philanthropic causes.
Warren Buffett is married to Susan Buffett and has 3 children. He likes to collect old cars. His family life has been an inspiration to many people. In 2012, he donated $30 billion to the Gates Foundation.
Warren Buffett is, and definitely will remain one of the most successful investors of all time across the globe. While he is best known for his investment partnership with fellow investor, Berkshire Hathaway partner and friend Charlie Munger, his career as an investor spans more than 60 years. Buffett has dominated the investing competition for more than half a century and is one of the few investors to have achieved billionaire status. He has made one of the most remarkable comebacks in business history, after his money was almost completely lost in the 2008 financial crisis. The most important part of the whole story is that Buffett has never relied on luck or luck. on the guesswork to make your fortune You’ve always made the right bets at the right time and continue to be successful in the investment game, even after the financial crisis. This is why it is worth studying the man who is among the richest people in the world and has managed to keep his money despite market volatility. He is the kind of person you can learn a lot from. His success is due not only to his great financial acumen, but also to his deep understanding of the human psyche and his ability to use both his intuition and his rational mind when making investment decisions.