Warren Buffet - Best investor of all times?

Table of Contents

Warren Buffet today

Warren Buffet is the 3rd richest person in the world in the forbes 400 2019 list (Was First place in 2008)!
He is considered to be the best investor of all times and has a net worth of $86.9 billion according to forbes.
He invests through his main company which is Berkshire Hathaway, at which he happens to be the CEO* and chairman*.

Warren Buffet’s childhood (1930-1947)

Born on August 30, 1930 at Nebraska Omaha, to a stockbroker Father(Later congressman) and homemaker mother. He was the middle brother out of three kids, the other two being two sisters.

Reselling goods for a higher price

He had demonstrated a sense for business from a very young age.
At the age of 6, he bought six packs of coca-cola from his grandfather’s grocery store and sold each of them for 5 cents (30 cents total) Earning 5 cents revenue on each six-pack
He also sold chewing gum, at a 2 cents profits for each pack. Refusing to sell a single gum out of a 5 pack, saying he wouldn’t be able to sell the rest.

Bought first stock

At the age of 11, he bought 6 stocks of Cities service, 3 for himself and 3 for his sister, at the price of 38$ per share, it later dropped to 27$ and raised to 40$, he then sold the shares. After he did so, the price per stock got up to 200$, teaching young Warren an important lesson about investing.
1942 Warren’s family moved to washington D.C.

Delivering newspapers

At the age of 13, Warren is making $175 monthly delivering Washington Post newspapers.
He filed his first tax deduction, having a deduction of 35$ on his bike.

Farmland purchase and Pinball machine business

At 14 years old, he invests $1,200 of his newspaper profits into 40 acres of farmland. A tenant farmer worked the land and shared the profits with buffet. Same year he makes a deal with his friend to invest 25$ in a pinball machine and place it at a barbershop.
It soon doubles it’s price with revenue allowing buffet and his partner to buy more machines and place them at more barber shops.
Untill at the age of 17 they sell the business for 1200$

Other accomplishments untill 17 years old

He had also by the age of 17
a.launched multiple businesses – many unsuccessful
b. sold thousands of golf balls
c. read at least a 100 books on business, an important one mentioned is a 1000 ways to make a 1000$.
d. hawked 600,000 newspapers

A reflection on buffet’s childhood

Unlike goggins it seems that Buffet had quite a high status family.
With his father working at the stock market and becoming a congressman later, he had the tools to help Buffet.
Nonetheless it does not reduce Buffet’s geniousness and ability to follow his goal with passion and determination.
Launching so many businesses, failing, reading so many books, not giving in to circumstances and urges, definately requires a thick skin.

Warren Buffet – Early adulthood(1947-1951)

Warren Buffet at first claimed that he didn’t need higher education, but later got pressured into studying by his father.

Bachelor of Science

So he entered Wharton school of the university of Pennsylvania, where he studied for 2 years, he later returned to Nebraska at 1948, because his father was not reelected
and got transfered to University of Nebraska, where he continued his studies and graduated as Bachelor of Science in business administration.

Master of Science

He then applied to Harward business school and got rejected, with the claim that he was too young.
He had in that period read a book “Intelligent Investor” by Benjamin Graham which influenced him a lot. Later finding out that the author was a professor at the economics faculty, at university of columbia.
So at 1950 he applied, and finished his Master of Science degree in economics by 1951.

He then briefly attended New York Institute of Finance.

After that he had finished his official education.

Now, years later he says that college is not a must to progress in career.

First jobs (1951-1956)

He had wanted to work for Benjamin Graham at his first years but despite him being the only student who received A+ on his class Ben rejected him, explaining that the jews in the industry were being discriminated and that he wanted to save a few positions for his fellow jews.

Father’s Firm (1951-1954)

Warren was disappointed and the same year, 1951 went to work at his father’s investment firm.

Working with Ben Graham (1954-1956)

At 1954 he finally got accepted to Ben’s firm
He worked there till in 1956 Ben’s firm was dismantled and Ben retired.

Marriage

At that period in 1952 he also got married to Susan Thompson

Starting Buffet Partnership (1956-1969)

Building 7 partnerships (1956-1962)

He then at 1956 formed “Buffet partnerships” gathering 105,000$ – from seven individuals, while he himself only invested 100$ in the sum. Agreeing that he will have a 50% fee from all gains above 4%, on the other side he agreed to cover 25% of any losses.
The following years he had formed more and more partnerships, ending up at 7.

1962 – He merged all his 7 partnerships into 1. Had his first investment at Berkshire Hathaway Textile company (Producing men suits). Also this year he had become a millionaire at age 32 by the profits of his partnerships ( he reinvested all his gains back into the partnership throughout the years ).
1965 – Purchasing controlling stocks of berkshire hathaway

Preparing for bear market* 1966-1969

1966 – Buffet feels there is no opportunity and closes the partnerships for new partners
1967 – Buffet told his partners he was running out of new ideas and that there were new mutual funds that had better results than his.At 1966 and 1967 he bought first two businesses for his fund, investing 15$ million, at the end of 1967 the Buffet partnership was worth 65$ million
1968 – assets under his management were 104$ million, it was buffet’s greatest year, he had gained 25$ million dollars for himself throughout the last 13 years.
1969 – Warren Buffet dismantles the Buffet Partnership,

liquidating all the money, and offers his partners two choices other than cashing out. The first is to keep the money with him and invest the money they had in the two companies he invested in, which are: Berkshire Hathaway and Diversified Retailing. The second is move that money to his college classmate’s fund Sequoiafund (www.sequoiafund.com). Thus starting Berkshire hathaway era.

Personal life events

Also at 1957 – bought his 5 room house for 31,500$ at which he lives till this day.
And at 1958 he had his third child

At 1960 – First met Charlie Munger forming a lifelong friendship. Munger is today the vice president of Berkshire Hathaway.

Berkshire Hathaway History

Berkshire hathaway (Pre Buffet era)

At first Berkshire Hathaway were two firms in textile area.
-Hathaway Manufacturing company(incorporated* at 1888)

-Berkshire Cotton manufacturing company(incorporated* at 1889)
Turned into Berkshire Fine Spinning Associates at 1929

Both firms merged to form Berkshire hathaway at 1955
At 1965 an investment group lead by buffet took full control of the company.
Later at 1985 the company would liquidate all it’s textile business operations and become solely a conglomerate*.

About Berkshire Hathaway (Buffet era)

Since Buffet acquired controlling stocks at berkshire hathaway he gradually stopped textile manufacturing and started expanding the company by buying assets in media(The washington post), insurance(GEICO), and oil (Exxon).
It is now a company that owns many sub – companies in lots of great areas, it is currently traded at S&P 500 – which is the list of 500 most valuable stocks of america, at the fifth place.
It owns approximately 70 companies, with 90 to 100 percent share holds mostly. And is a minority holder at some 50 companies, including Coca- cola with 9 percent holdings($18,940,000,000), Apple with 5.4 percent ($40,271,000,000) , american express with 18 percent (
$17,777,870,682) according to wikipedia. (5)
The companies are found in the fields of: Diversified investments, Property insurance, Restaurants, Food processing, Aerospace*, Utilities*, Toys, Media and more.

Key moments of Warren Buffet since acquiring Berkshire Hathaway (1969-today)

Warren Buffet leaves investing (1969-1974)

1969-1974 As said earlier buffet didn’t find many opportunities at the bull market of 1969 left investing and went “fishing”. The time he was “fishing” he handled the management of the businesses he invested in.
1970 becomes chairman and CEO of berkshire hathaway
1974 he returns to investing.

Buffet as a Director (1974- 2006)

1974 – 1986 and 1996-2011 – Director at the Washington Post Company.
1989 – 2003 – Director of the Gillette Company.
1989 – 2006 – Director of the Coca-Cola Company.

Forbes 400 Richest list (1982-2019)

1982 – Appears on the first annual Forbes list of the 400 richest people in America. His net worth is estimated at $250 million.
1993 – Reaches the number one spot on the Forbes list of the 400 richest people in America. His net worth is estimated at $8.33 billion.

March 5, 2019 – Buffett ranks No. 3 on Forbes’ annual list of billionaires, with a net worth of $82.5 billion.

Buffet at politics (2003-2004)

2003 – Joins Arnold Schwarzenegger’s California gubernatorial campaign as an adviser.
May 2004 – Buffett announces he has agreed to serve as an economic adviser to John Kerry during the Kerry presidential campaign.

Other Noteful Investments (2008- 2018)

September 2008 – Invests $5 billion in Goldman Sachs and $3 billion in General Electric.

August 2011 – Invests $5 billion in Bank of America.

May 4, 2018 – Announces that Berkshire Hathaway bought approximately 75 million additional shares of Apple stock during the first quarter of 2018 — the company now owns more than 230 million shares.

Philantrophy (2006 – 2011)

2006 – Announces plans to gradually donate all his Berkshire Hathaway shares to philanthropic foundations.

2010 – Launches The Giving Pledge with Bill Gates. The initiative encourages the world’s billionaires to dedicate the majority of their wealth to philanthropic causes.
February 15, 2011 – Receives the Presidential Medal of Freedom. (From Obama, for donating big amounts of money to charity and inspiring other billionaires to do so)
August 14, 2011 – The New York Times publishes an op-ed written by Buffett, “Stop Coddling the Super-Rich.” He calls on Congress to increase taxes on Americans making more than $1 million. This becomes known as the Buffett Rule.

Beating cancer

April 17, 2012 – Buffett confirms through a press release that he has been diagnosed with prostate cancer. Soon later that year he reports overcoming it

Two other facts about Warren Buffet

His eating habits
Quite surprisingly he has probably the worst eating habits you could imagine, eating mcdonalds almost every day.
Drinking cherry coke 5 times a day

Fun fact
Once his wife susan was sick and asked him to bring a pan, he then went downstairs, and brought a sphagetti filter, she then told him it is not a pan and has holes in it, so he went back downstairs and brought a tray with it.

Vocabulary

*Aerospace – Projects that focus on work 100 km above the ground, mainly around earth
*Utilities – An organization that maintains the infrastructure for public services such as Airports, Electricity, Bridges, State schools etc.
*Incorporated – legally listed
*Conglomerate – A group of companies in entirely different industries under one corporate group.
*Bull Market – a market that is generally rising

*Bear Market – a market that is generally dropping

CEO, Chairman and Director

*CEO – Chief Executive Officer – Is the person to whom all the leading executives of the company report to, and is the person who is responsible for vision development, partnership choices. In smaller companies he is responsable for hiring, firing and supervision. The CEO is appointed by a vote of the board, and so the chairman has great influence over the choice of the CEO.
*Chairman – A Director appointed by the board to supervise the boards meatings or as in the case of buffet, The founder of the company.
*Director – A person chosen to represent a certain group of shareholders in the board’s meetings.