LeoGlossary: Warren Buffett
Born: August 30, 1930
CEO of Berkshire Hathaway
Warren Buffett is considered by many to be the greatest investor in the world. For more than half a century the annual return generated by Berkshire Hathaway exceed 20%. Buffett is known for his value approach to investing, as outlined by Benjamin Graham.
At one time he was the wealthiest person in the world, a title since taken by Elon Musk. Buffett still ranks in the top 10, with a net worth as of 2022 exceeding $100 billion.
He is one of the most followed individuals when it comes to economic and investing matters.
Known as the "Oracle of Omaha", Buffet was born in the Nebraska city. His father was a US Congressman meaning that Warren's early schooling occurred in Washington DC. He developed an interest in the stock market early in life, often hanging around in the lounge of a local stock brokerage firm.
After high school, he went to the Wharton School of the University of Pennsylvania. He wanted to skip college and go into business, a decision that was overruled by his father.
He eventually left there, finishing his undergraduate at the University of Nebraska. From there, he went on to Columbia to earn his MS.
After school, he formed Buffett Partnership in 1956. This acquired a textile company called Berkshire Hathaway, using the name to create a holding company.
Since 1970 Buffett was the largest shareholder in Berkshire. Later that decade, Charlie Munger joined the company as Vice-Chairman.
Buffett is known for being frugal. Rumor is that when he became a millionaire, his wife went out and purchased him a Cadillac because she felt it unfitting for one of his stature to drive around in the vehicle he did.
He still resides in the same home in Omaha that he purchased more than half a century ago in spite of his wealth increasing many orders of magnitude.
Being a disciple of Graham, Buffett only invests in companies that he understands. He also is looking at the long term picture. His feeling is the best stocks to buy are those you never intend to sell. Because of this, he looks at stocks as pieces of a company rather than assets for speculation.
Since he is rather conservative in his approach, when Buffett decides to buy shares in a company, it is big news. He tends to avoid the early stages, avoiding the concept of growth stocks. His buying of Apple epitomizes how he views things. Buffett started to buy into Apple long after it has a major move because it was only then that the value was there. The company had to grow to the point where Buffett could feel reasonably certain the numbers would continue.
Because of this style, many of his investments tend to be in those industries that most consider "boring". He is known to buy furniture and insurance companies, industries most tend to avoid. His investments in Geico and Gen Re are prime examples.
Berkshire's portfolio does not only include stocks. Buffett is known to go into entire privately held companies. If the business model makes sense to him and the numbers are there, he will move forward.
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. That's what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing.
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