Warren Buffett

Warren Buffett is an American investor and the chairman and chief executive of Berkshire Hathaway. He is widely regarded as the most successful investor of the twentieth century, and he is known for his long-term approach and for his plain-spoken annual letters to shareholders.

Early Life

Buffett was born in 1930 in Omaha, Nebraska, the son of a stockbroker and congressman. He showed an early interest in business and bought his first shares at the age of eleven.

He studied at the University of Nebraska and at Columbia Business School, where he was taught by Benjamin Graham. Graham's approach to value investing had a decisive influence on him.

He worked as an analyst and then established his own investment partnership in 1956. The partnership produced high returns over more than a decade.

The Buffett Partnership

The partnership invested in undervalued securities and used the techniques of value investing. Buffett sought companies with strong fundamentals and able management.

He closed the partnership in 1969 when he judged that the market had become overvalued. He then took control of Berkshire Hathaway, a textile company, and used it as a vehicle for investment.

He acquired insurance companies, including National Indemnity and GEICO, and used their premiums to fund further investment. The float gave him access to capital at low cost.

Berkshire Hathaway

Buffett built Berkshire into a conglomerate with interests in insurance, railroads, utilities, and consumer goods. The company acquired the Burlington Northern Santa Fe railway and a large stake in Apple.

He invested on the basis of the intrinsic value of businesses and held his positions for long periods. He avoided industries that he did not understand.

He was a critic of short-termism and of the excessive fees charged by investment managers. He advocated low-cost index funds for ordinary investors.

Philanthropy and Personal Life

Buffett pledged the greater part of his wealth to the Bill and Melinda Gates Foundation and to foundations run by his children. The pledge was one of the largest acts of charity in history.

He is known for his frugal habits and for his residence in the same house in Omaha for decades. He has been married twice and has three children.

He has written extensively on investment and on public policy, and he has campaigned for higher taxes on the very wealthy.

Legacy

Buffett is regarded as the most successful investor of the modern era, and his annual letters are widely read. He has influenced a generation of investors.

His approach emphasises patience, discipline, and a margin of safety. He is also known for his wit and for his plain language.

He has become a symbol of the virtues of long-term investing. His philanthropy has made him one of the leading benefactors of his time.

The Value Approach

Buffett's approach is based on the distinction between price and value. He seeks to buy securities at a discount to their intrinsic value and to hold them until the market recognises the true worth.

He follows the teachings of Benjamin Graham, who emphasised the margin of safety and the analysis of financial statements. He also values qualitative factors, such as the quality of management and the durability of the business.

He prefers businesses with a competitive advantage, which he calls a moat, and with predictable earnings. He avoids industries subject to rapid technological change.

The Insurance Float

The insurance operations of Berkshire generate premiums that must be held until claims are paid. The float provides the company with a large pool of capital at a low cost.

Buffett invests the float in securities and in the acquisition of whole businesses. The strategy has been described as one of the most successful in the history of finance.

The reinsurance business, including the General Re acquisition, has contributed to the growth of the float. The company also owns utilities, railroads, and manufacturing businesses.

Notable Investments

Buffett's investments include the Washington Post, Coca-Cola, American Express, and Wells Fargo. He has also invested in technology companies, including Apple.

He is known for his long holding periods and for his reluctance to sell. He has said that his favourite holding period is forever.

He has avoided investments that he does not understand, and he has been criticised for missing the growth of the technology sector. His recent investments have adapted to the changing market.

Shareholder Letters and Communication

Buffett's annual letters to shareholders are widely read and have been collected in book form. They explain his investment philosophy and his views on business and on the economy.

He holds an annual meeting in Omaha, which has been called the Woodstock of capitalism. The meeting attracts tens of thousands of shareholders.

He is known for his wit and for his plain language. He has used his platform to comment on public policy and on the conduct of business.

Philanthropy

Buffett has pledged to give away the greater part of his fortune. He has given most of his shares to the Bill and Melinda Gates Foundation and to foundations run by his children.

He has also supported the Giving Pledge, which he co-founded with Bill Gates and Melinda French Gates. The pledge commits billionaires to give away a majority of their wealth.

He has campaigned for higher taxes on the wealthy. He has argued that the tax system should be fairer and that the rich should pay a larger share.

See also

• Value investing
• Berkshire Hathaway