Warren Buffett, the man who we've all come to know as the "Oracle of
Omaha," was born in Omaha, Nebraska. His dad was a man named Howard
Buffett. Howard was a stockbroker and United States
Representative. Warren's mom was named Leila Buffett. The young Buffett
began working at his father's brokerage at the age
of 11. It was around this time that he made his first stock purchase.
Warrn bought shares of a company called Cities Services for $38 each. He
later sold the shares of Cities Services stock when the price reached
approximately $40, only to see them rocket to $200 a
few years later. This taught him the importance of investing in good
companies for the
long term. At the age of 14 he spent $1,200 he had saved up from two
paper routes to
buy 40 acres of farmland which he then rented to tenant farmers.
The Wharton School at the University of Pennsylvania was where Warren Buffett initially went to school. However, he later transferred to the University of Nebraska. There he began his interest in investing after reading Benjamin Graham's The Intelligent Investor. He obtained a Master's degree in economics in 1951 at Columbia Business School, studying under Benjamin Graham, alongside other future value investors including Walter Schloss and Irving Kahn.
This is something few people realize, but another important influence on Warren's investment philosophy was the well known investor and writer Philip Fisher. Odds are you might never have even heard of him. Well, after Warren earned the only A+ Benjamin Graham ever handed out to a student in his securities analysis class, Buffett wanted to work at Graham-Newman but was initially turned down. (Can you imagine that?!) Warren instead went to work at his father's brokerage firm as a representative until Graham offered him a position in 1954. Warren Buffett returned to Omaha two years later, when Graham retired.
Buffett established Buffett Associates, Ltd., his first investment partnership, in 1956. It was financed by $100 from Buffett, the general partner, and $105,000 from seven limited partners consisting of Buffett's family and friends. Buffett created several additional partnerships which were later consolidated as Buffett Partnership Limited. He ran the partnerships out of his bedroom, adhering closely to Graham's investment approach and compensation structure. These investments made in excess of 30% compounded annually between 1956 to 1969, in a market where 7% to 11% was the norm. Buffett employed a three-pronged approach:
In 1962 Buffett Partnerships began purchasing shares of Berkshire Hathaway, a large manufacturing company in the declining textile industry that was selling below its working capital. Buffett would eventually dissolve all his partnerships to focus on running Berkshire Hathaway. At the time, Charlie Munger, Berkshire's current Vice Chairman, remarked that purchasing the company was a mistake, due to the failure of the textile industry. Berkshire, however, became one of the largest holding companies in the world, as Buffett redirected the company's excess cash to acquire private businesses and stocks of public companies. At the core of his strategy were insurance companies, due to the large cash reserves ("float") they must keep on hand to pay out future claims. Essentially, the insurer does not own the float, but may invest it and keep any proceeds.
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 he began to focus on high-quality businesses with enduring competitive advantages. He described such advantages as a "moat" that kept rivals at a safe distance, as opposed to commodity businesses, which sell undifferentiated products and face direct competition. A classic example of a wide-moat company is Coca-Cola, because consumers are willing to pay more for a Coke than for a generic beverage with a similar taste. On the other hand, salt is considered a commodity product because consumers generally have no preferences for one brand of salt over another.
Investment in wide-moat businesses has become a hallmark of Berkshire Hathaway, particularly when buying whole companies rather than public stocks. As a result, it now owns a large number of businesses which are dominant players in their respective industries, specialize in various niche markets, or possess other unique characteristics to separate them from their competitors. http://www.warrenbuffettbiography.net/
The Wharton School at the University of Pennsylvania was where Warren Buffett initially went to school. However, he later transferred to the University of Nebraska. There he began his interest in investing after reading Benjamin Graham's The Intelligent Investor. He obtained a Master's degree in economics in 1951 at Columbia Business School, studying under Benjamin Graham, alongside other future value investors including Walter Schloss and Irving Kahn.
This is something few people realize, but another important influence on Warren's investment philosophy was the well known investor and writer Philip Fisher. Odds are you might never have even heard of him. Well, after Warren earned the only A+ Benjamin Graham ever handed out to a student in his securities analysis class, Buffett wanted to work at Graham-Newman but was initially turned down. (Can you imagine that?!) Warren instead went to work at his father's brokerage firm as a representative until Graham offered him a position in 1954. Warren Buffett returned to Omaha two years later, when Graham retired.
Buffett established Buffett Associates, Ltd., his first investment partnership, in 1956. It was financed by $100 from Buffett, the general partner, and $105,000 from seven limited partners consisting of Buffett's family and friends. Buffett created several additional partnerships which were later consolidated as Buffett Partnership Limited. He ran the partnerships out of his bedroom, adhering closely to Graham's investment approach and compensation structure. These investments made in excess of 30% compounded annually between 1956 to 1969, in a market where 7% to 11% was the norm. Buffett employed a three-pronged approach:
- Generals: undervalued securities that possess margin of safety and meet expected return-to-risk characteristics.
Arbitrages: company events that are not related to broader market changes, such as mergers and acquisitions, liquidation, etc.
Controls: build sizeable holdings, ally with other shareholders or employ proxies to affect changes in companies.
In 1962 Buffett Partnerships began purchasing shares of Berkshire Hathaway, a large manufacturing company in the declining textile industry that was selling below its working capital. Buffett would eventually dissolve all his partnerships to focus on running Berkshire Hathaway. At the time, Charlie Munger, Berkshire's current Vice Chairman, remarked that purchasing the company was a mistake, due to the failure of the textile industry. Berkshire, however, became one of the largest holding companies in the world, as Buffett redirected the company's excess cash to acquire private businesses and stocks of public companies. At the core of his strategy were insurance companies, due to the large cash reserves ("float") they must keep on hand to pay out future claims. Essentially, the insurer does not own the float, but may invest it and keep any proceeds.
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 he began to focus on high-quality businesses with enduring competitive advantages. He described such advantages as a "moat" that kept rivals at a safe distance, as opposed to commodity businesses, which sell undifferentiated products and face direct competition. A classic example of a wide-moat company is Coca-Cola, because consumers are willing to pay more for a Coke than for a generic beverage with a similar taste. On the other hand, salt is considered a commodity product because consumers generally have no preferences for one brand of salt over another.
Investment in wide-moat businesses has become a hallmark of Berkshire Hathaway, particularly when buying whole companies rather than public stocks. As a result, it now owns a large number of businesses which are dominant players in their respective industries, specialize in various niche markets, or possess other unique characteristics to separate them from their competitors. http://www.warrenbuffettbiography.net/
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