Biography
Nicknamed the "Oracle of Omaha", Buffett has amassed a substantial fortune from astute investments through his company
Berkshire Hathaway, of which he holds 38%. With an estimated net worth of $42.9 billion as of 2004, he is ranked by Forbes as the second-richest person in the world, behind Bill Gates.
Buffet was born in Omaha, Nebraska. His father was a stockbroker and member of Congress. Buffett was educated at the University of Nebraska and he qualified with a masters degree in economics from Colombia University.
In 1957 he started his own investment partnership, putting all of his own money into it , along with loans from friends and family. By 1969 he had returned an average of almost 30% a year.
Under Buffetts supervision, his fund has outperformed the S&P 500 and the Dow Jones for over forty years. In a period when investment markets appear more puzzling than sensible, it is not surprising that investors all over the world have become interested in Buffett's investment approach and ideas.
Buffett's contrarian investment strategy customarily focuses his investments in undervalued companies with good long-term growth potential. The actual value generated is more by the companies he owns than stock market investments, although his stock ownership in companies such as Coca-Cola and Gillette attracts more attention. He famously avoided tech companies during the dot-com bubble of the late 90s.
He also owns insurance companies like Geico and General Re that generate a large free cash flow. These companies are a source of funds that he then allocates to Berkshire Hathaway's subsidiaries and uses to acquire new companies. As of 2003,
Berkshire Hathaway owns 40 companies, with around 150,000 employees.
Buffett believes that much of the problem with the economies of the United States and other industrialized countries in recent years results from the proliferation of persons and organizations who produce nothing directly but are compensated based on the volume of business which they transact. He feels that most stock trades are recommended and made primarily to benefit the brokers rather than the investors and has stated that he feels that the world would benefit if each person had a lifetime maximum of twenty stock trades. He steadfastly refuses to split Berkshire Hathaway stock because the purpose of this would be to facilitate trading, which he has no desire to do.
He states that he sees his fellow Berkshire Hathaway investors as partners and hopes that they take their investment likewise, as a long-term or lifelong investment; he discourages those with a short-term view from investing in Berkshire Hathaway. He prefers Berkshire Hathaway shareholders actually to take physical possession of their share certificates rather than allowing their shares to be held by a brokerage firm.
A $10,000 investment into Berkshire Hathaway when Buffett took control in 1965 would be worth over $50 million today. By comparison, $10,000 in the S&P 500 would have grown to only $500,000.
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The Essays of Warren Buffett