AN INTERESTING STORY OF WARREN BUFFET’S LIFE
Introduction to the Great Investor • Warren Buffet was born on August 30, 1930, in Omaha, Nebraska. • His father, Howard Buffet worked in a stock broking firm. But due to great depression, he lost his job. • Later, with his savings, he opened his own Stock broking Firm. • Howard called Warren, a fireball, as Warren did so many businesses at such a small age. • Warren gives his success credits to his father, whose guidance helped him a lot. • 1st investment was in the company called Cities Services, where he bought the shares at the price of $38. • He is now, known as the Oracle of Omaha, with a net worth of $89.9 billion, and being the Chairman of Berkshire Hathaway.
EARLY CHILDHOOD BUSINESSES • Warren, was always interested in reading, playing with numbers and doing small businesses. • He once told her sister that he will become World’s richest man, and yet he achieved it. • He started a Pinball business at the age of 7. He set up the pinball machines at every Barber shops and gained major profit from it. • Later, he sold his business for $1200. • He also distributed the Washington Post, sold Coca-Cola and Wrigley’s chewing gum door to door. • At the age of 14, with his savings he bought 40 acres property.
E D U C AT I O N A L QUALIFICATION S
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At the age of 16, he enrolled himself in the Wharton School at the University of Pennsylvania.
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Later he was moved to the University of Nebraska in Lincoln, and completed his Bachelor of Science degree in business administration.
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For post-graduation, he applied in Harvard University, but he got rejected.
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After his major research, he enrolled himself in the Columbia University for his post-graduation.
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In this university he found his mentor, Benjamin Graham.
WHO IS BENJAMIN GRAHAM?
• Benjamin Graham created the concept of VALUE INVESTING. • Later, he came to be known as The father of Value Investing. • Warren, followed his philosophy which was analyzing the financial statement of the company and then calculating the intrinsic value of the company. • Warren also worked as a Security analyst at Graham-Newman Corp., a partnership firm of Benjamin Graham.
What is the concept of VALUE INVESTING? Value investing mean buying the undervalued stocks or buying shares when the intrinsic value is low. Intrinsic value is justified by the company’s assets, earnings, dividends and its earning power.
BERKSHIRE HATHAWAY • Berkshire Hathaway was a textile company, which slow and steadily was losing its business in the economy. • Later, they began to give away their textile mills and started re-purchasing the company’s share from the shareholders. • In 1962, Warren Buffet started buying the shares of the company for the first time. • He bought the shares as he figured that the management was planning to close the company, and when company will sell out their remaining textile mills, then the company will surely buy back the shares, and then he can get a better price. • Till, 1964 he continued buying a good amount of stocks.
Warren made a deal for $11.50 for selling out his share, and the company also agreed with the price. • • • • •
But later company’s management tried to trick him by providing him with an agreement of $11.375. Due to which Warren got angry for being cheated and rejected to sell his shares and started buying more stocks. Later he gain full control over the company. Warren always says that “The greatest enemies of the equity investors are the expenses and emotions”. This decision was made emotionally, but he converted his mistake into a big business. He made Berkshire Hathaway into a Holding Company.
WHAT IS A HOLDING COMPANY? WHAT ALL COMPANIES HE INVESTED IN? • • • •
Holding company simply means, a company which buys the share of another company, or in other words, invest in other companies. Through Berkshire Hathaway, Warren invested in companies like – Washington Post, Coca-Cola, Glico, Dairy Queen, BNSF etc. He also started investing in insurance companies. He closed the textile business of the Berkshire Company.
In 1988, Warren started buying the shares of Coca-Cola and brought 7% stakes • He still holds the shares of Coca-Cola. • Since, he delivered Washington post newspapers and Wrigley’s chewing gum, Warren came to know about the product quality, business and customer loyalty. • He continued to follow the philosophies of Benjamin Graham and Philip Fisher. • Benjamin said “Investing is most intelligent when it’s most like business”, while Fisher said “Invest in Quality Business”.
ARREN’S FAMOUS PHILOSOPHY AND LESSONS FOR INVESTMEN • His most famous philosophy, which combines both the philosophies of Fisher and Benjamin is, “Buy quality stocks at lower valuations”. • His most famous rules are – RULE no. 1Never lose money RULE no. 2- Never forget rule number 1. • His famous quotes are- “If you don’t find a way to make money while you sleep, you work until you die”. • “Be fearful when others are greedy, and be greedy while others are fearful”. • “If you are not thinking about owning a stock for 10years, don’t even think about owning it for 10 minutes”.
WARREN’S LIFE APART FORM BEING AN INVESTOR. • • • • • •
Warren, now is of 88 years old. Many people say that why is he working when he is so rich? Well, for him, Age is just a number, and investing is his passion. He also loves to read a lot, as he spends almost 7-8 hours reading. His he happily married, and has three children: Susan Alice Buffet, Howard Buffet and Peter Buffet. He has almost donated $46 billion, and is considered as the most charitable person. He adores his business partner, Charlie Monger.
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