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Warren Buffett, The Master of Investment

Warren Buffett demonstrated keen business abilities at a young age. He formed Buffett Partnership Ltd. in 1956, and by 1965 he had assumed control of Berkshire Hathaway. Overseeing the growth of a conglomerate with holdings in the media, insurance, energy and food and beverage industries. Buffett became one of the world’s richest men and a celebrated philanthropist.

Who is Warren Buffet?

Warren Edward Buffett was born on August 30, 1930, to his mother Leila and father Howard, a stockbroker-turned-Congressman. The second oldest, he had two sisters and displayed an amazing aptitude for both money and business at a very early age.

Warren buffet as of 3/4/19 has a net worth of 82.5b and he is ranked the 3rd billionaires in Forbes ranking and also ranked 16th as the most powerful people by Forbes.

Young Warren Buffet

At eleven years old, he purchased three shares of Cities Service Preferred at $38 per share for both himself and his older sister, Doris. Shortly after buying the stock, it fell to just over $27 per share. A frightened but resilient Warren held his shares until they rebounded to $40. He promptly sold them – a mistake he would soon come to regret. Cities Service shot up to $200. The experience taught him one of the basic lessons of investing: patience is a virtue.

Warren Buffett’s Education

In 1947, Warren Buffett graduated from high school when he was 17 years old. It was never his intention to go to college; he had already made $5,000 delivering newspapers (this is equal to $42,610.81 in 2000). His father had other plans and urged his son to attend the Wharton Business School at the University of Pennsylvania.

Buffett only stayed two years, complaining that he knew more than his professors. When Howard was defeated in the 1948 Congressional race, Warren returned home to Omaha and transferred to the University of Nebraska-Lincoln. Despite working full-time, he managed to graduate in only three years.

Warren Buffett approached graduate studies with the same resistance he displayed a few years earlier. He was finally persuaded to apply to Harvard Business School. Which is the worst admission decision in history, rejected him as “too young”. Slighted, Warren then applied to Columbia where famed investors Ben Graham and David Dodd taught – an experience that would forever change his life.

Early Career

In 1951 he received his master’s degree in economics at Columbia University. Where he studied under economist Benjamin Graham and furthered his education at the New York Institute of Finance.

Influenced by Graham’s 1949 book, The Intelligent Investor, Buffett sold securities for Buffett-Falk & Company for three years, then worked for his mentor for two years as an analyst at Graham-Newman Corp.

Warren Buffett Returns Home

Returning home, he took a job at his father’s brokerage house and began seeing a girl by the name of Susie Thompson. The relationship eventually turned serious and in April of 1952, the two got married. They rented out a three-room apartment for $65 a month; it was run-down and the young couple shared the space with a family of mice. It was here their daughter, also named Susie, was born. In order to save money, they made a bed for her in a dresser drawer.

During these initial years, Warren’s investments were predominately limited to a Texaco station and some real estate, but neither were successful.

Warren Buffett Goes to Work for Ben Graham

Warren and Susie moved into a house in the suburbs of New York. Buffett spent his days analyzing S&P reports, searching for investment opportunities. It was during this time that the differences between the Graham and Buffett philosophies began to emerge.

Warren became interested in how a company worked – what made it superior to competitors. Ben simply wanted numbers whereas Warren was predominately interested in a company’s management as a major factor when deciding to invest, Graham looked only at the balance sheet and income statement; he could care less about corporate leadership. Between 1950 and 1956, Warren built his personal capital up to $140,000 from a mere $9,800. With this war chest, he set his sights back on Omaha and began planning his next move.

The Buffett Partnership

On May 1, 1956, Warren Buffett rounded up seven limited partners which included his sister Doris and Aunt Alice, raising $105,000 in the process. He put in $100 himself, officially creating the Buffett Associates, Ltd. Before the end of the year, he was managing around $300,000 in the capital.

Small, to say the least, but he had much bigger plans for that pool of money. He purchased a house for $31,500, affectionately nicknamed “Buffett’s Folly”, and managed his partnerships originally from one of the home’s bedrooms, then later, a small office. By this time, his life had begun to take shape; he had three children, a beautiful wife, and a very successful business.

Impressive 251.0% Profit

Over the course of the next five years, Buffett’s partnerships racked up an impressive 251.0% profit, while the Dow was up only 74.3%. A somewhat-celebrity in his hometown, Warren never gave stock tips despite constant requests from friends and strangers alike. By 1962, the partnership had capital in excess of $7.2 million, of which a cool $1 million was Buffett’s personal stake.

He also had more than 90 limited partners across the United States. In one decisive move, he melded the partnerships into a single entity called “Buffett Partnerships Ltd.”, upped the minimum investment to $100,000, and opened an office in Kiewit Plaza on Farnam street.

Business Collaboration

In 1962, a man by the name of Charlie Munger moved back to his childhood home of Omaha from California. Though somewhat snobbish, Munger was brilliant in every sense of the word. He had attended Harvard Law School without a Bachelor’s Degree. Introduced by mutual friends, Buffett and Charlie were immediately drawn together, providing the roots for friendship and business collaboration that would last for the next forty years.

Ten years after its founding, the Buffett Partnership assets were up more than 1,156% compared to the Dow’s 122.9%. Acting as lord over assets that had ballooned to $44 million dollars, Warren and Susie’s personal stake was $6,849,936. Mr. Buffett, as they say, had arrived.

Wisely enough, just as his persona of success was beginning to be firmly established, Warren Buffett closed the partnership to new accounts. The Vietnam War raged full force on the other side of the world and the stock market was driving up by those who hadn’t been around during the depression. All while voicing his concern for rising stock prices, the partnership pulled its biggest coup in 1968, recording a 59.0% gain in value, catapulting to over $104 million in assets.

Berkshire Hathaway

The next year, Warren went much further than closing the fund to new accounts; he liquidated the partnership. In May 1969, he informed his partners that he was “unable to find any bargains in the current market”. Buffett spent the remainder of the year liquidating the portfolio, with the exception of two companies – Berkshire and Diversified Retailing.

The shares of Berkshire were distributed among the partners with a letter from Warren informing them that he would, in some capacity, be involved in the business, but was under no obligation to them in the future. Warren was clear in his intention to hold onto his own stake in the company (he owned 29% of the Berkshire Hathaway stock) but his intentions weren’t revealed.

Recent Activity and Philanthropy

In June 2006, Buffett made an announcement that he would be giving his entire fortune away to charity. committing 85 percent of it to the Bill and Melinda Gates Foundation. This donation became the largest act of charitable giving in United States history. In 2010 Buffett and Gates announced they had formed The Giving Pledge campaign to recruit more wealthy individuals for philanthropic causes.

In 2012 Buffett disclosed that he diagnosed with prostate cancer. He began undergoing radiation treatment in July, and successfully completed his treatment in November.

Warren Buffet in Politics

A vocal supporter of Democratic presidential nominee Hillary Clinton, whom he’d endorsed in 2015. Buffett also challenged the Republican nominee, Donald Trump, to meet and share their tax returns. “I will meet him in Omaha or Mar-a-Lago or, he can pick the place, anytime between now and election, he said at an August 1 rally in Omaha. “I’ll bring my return, he’ll bring his return. We’re both under audit. And believe me, nobody’s going to stop us from talking about what’s on those returns. Trump did not accept the offer, and his refusal to share his returns ultimately did not prevent his election to the presidency in 2016.

America’s Largest Shareholder

In May 2017, Buffett revealed that he had begun selling some of the approximately 81 million shares he owned in IBM stock, noting that he did not value the company as highly as he did six years earlier. Following another sale in the third quarter, his stake in the company dropped to about 37 million shares. On the flip side, he increased his investment in Apple by 3 percent. After became Bank of America’s largest shareholder by exercising warrants for 700 million shares. Early the following year, he added more Apple shares to make it Berkshire Hathaway’s largest common stock investment.

By the way, we have gathered the top 7 quotes by Warren Buffet. I suggest you read them for your Entrepreneurship way. 

Warren Buffet is the best-known investor in the world. His life is full of journey and I hope you have liked it. But, would you go the way he did?