Today’s featured story on the spot light is the life story of the world’s greatest investor known as Warren Buffet and considered as the “Oracle of Ohama” for his investment tactics. He owns probably the most expensive stock in the world, which is his company Berkshire Hathaway, which reached its peak for a much as $147,000 per share.
He is considered as the richest man on earth last year 2008 at the age of 77 with a networth of US$62 Billion overtaking his longest competitor in the top position, Microsoft Owner Bill Gates.
A lot of investors look on his investment tactics to at least mimic his investment strategy.
Warren Buffet was born in Omaha Nebraska on August 30, 1930. His investment strategy leading to his success was credited to his influential mentor Benjamin Graham. In Buffett’s words: “I’m 15% Fisher and 85% Benjamin Graham.” According to him Graham taught him that “the basic ideas of investing are to look at stocks as business, use the market’s fluctuations to your advantage , and seek a margin of safety.”
Warren bought his first share of stock at the age of 11. He then filed his first income tax return at the age of 13 for $35 for his work as a newspaper delivery boy. When he had enough savings from his work, he then bought a small farm at the age of 14. At the age of 15, in his freshman year in high school, Buffett and his friend started to hasten their entrepreneurial skills when they spent $25 to buy a used pinball machine that they placed in a barber shop. With its success, within months, it expanded to three machines in different locations.
In 1952, at the age of 22, Warren Buffet married his wife Susan Thompson. He worked for his mentor Benjamin Graham but when his mentor retired in 1956, he then used his $140,000 savings to open an investment partnership named Buffett Partnership Ltd.
In just a matter of 8 years, in 1960, Buffett had already established seven partnerships: Buffett Associates, Buffett Fund, Dacee, Emdee, Glenoff, MoBuff, and Underwood. Because of these investment partnerships, Warren Buffett became a millionaire at the age of 32 when his partnerships were valued at $7 million of which over $1 million belonged to him.
Buffett then merged all his partnerships into one company and bought his present company Berkshire Hathaway which was a textile manufacturing firm back then. He had his first investment in a private business at Hochschild, Kohn and Co., a privately owned department store.
In 1970, Warren as Chairman of Berkshire Hathaway, started to write his famous “annual letters to shareholders” and began buying shares of various companies such as Washington Post Company, Buffalo Evening News, and ABC.
In 1979, his company Berkshire Hathaway began trading at $775 per share and ended at $1,310 per share enabling him to acquire a spot on Forbes 400. Warren continued acquiring shares of companies including Salomon Inc., and Coca-Cola which turned out to be one of his most lucrative investments.
Today, his company owns several stakes in other companies with investments which includes several industires: Insurance (GEICO, General RE), Jewelry (Borsheim’s), Utilities (MidAmerican Energy Holdings), Food (Dairy Queen, See’s Candies, Kraft Foods), Beverage (Coca-Cola), and Bank (Wells Fargo), etc.
Despite his tremendous success, he still lives a simple and humble life as with other millionaires written on a research study on millionaires in the survey conducted in the book “The Millionaire Next Door”.
- Warren still lives in the same small 3 bedroom house in mid-town Omaha Nebraska, that he bought after he got married for $31,500, some 50 years ago. He says that he has everything that he needs in that house and that house does not have a wall or a fence.
- Warren drives his own car everywhere and does not have a driver or security people around him.
- Warren never travels by private jet, although he owns the world’s largest private jet company.
- His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEOs of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis.
- Warren has given his CEO’s only two rules. Rule number 1: do not lose any of your shareholder’s money. Rule number 2: Do not forget rule number 1.
- Warren does not socialize with the high society crowd. His past time after he gets home is to make himself some pop corn and watch television.
- Warren Buffet does not carry a cell phone, nor has a computer on his desk.
In 2006, Warren Buffett earmarked a majority share of his company Berkshire Hathaway to charity of Bill Gates named Bill & Melinda Gates Foundation which was then valued at $31 Billion.
His children will not inherit a huge proportion of his wealth as he once commented: “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing”.
As an ending to this article, I would like to leave the readers some quotes from Warren Buffett regarding his stock investment strategy:
If past history was all there was to the game, the richest people would be librarians.
It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction.
It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.
Only when the tide goes out do you discover who’s been swimming naked.
Risk comes from not knowing what you’re doing.