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Warren Buffett Bio, Quotes, Background and Investment Style

Posted on April 2, 2011 by Thomas DeGrace

A detailed Warren Buffett bio of one of the most successful investors in our living times.  He is one of the very few billionaires who has amassed wealth majorly through investing in stocks. Warren Buffett is bestowed with titles like “The Oracle of Omaha” and the “Sage of Omaha”. Warren Buffett continues to shine brightly as an Investor, Businessman and Philanthropist. With a net worth of US $37 billion in 2009, Warren Edward Buffett is ranked as the second richest man in the world, just after his good friend Bill Gates who had the net worth of $40 Billion.

Background

Born on August 30, 1930, in Omaha, Nebraska, Buffett was inclined towards stock market, right from his childhood. In his senior year at the University of Nebraska, Warren Buffet was so impressed by the Investment Classic “Intelligent Investor” that he left his hometown to study in the guidance of Benjamin Graham, the author of the book. Graham taught him the importance of calculating company’s intrinsic value. After attaining a Master’s degree in Economics from Columbia Business School, he returned to Omaha to serve in his father’s brokerage firm.

In the year 1954, he joined Ben Graham’s Graham-Newman Corporation. After Graham retired in 1956, Buffett returned to Omaha to start a limited Investment Partnership with seven limited partners. Over the next thirteen years, Buffett compounded the money at an annual rate of 29.5%. He had set a target to defeat the Dow by just ten percentage points but with his brilliance, he defeated the Dow by twenty-two percent points between the years 1957 and 1969.

In 1965, Buffett’s partnership overtook Textile Company – Berkshire Hathaway located in Warren’s hometown Omaha, Nebraska. In March 1967, Berkshire purchased the outstanding stocks of two insurance companies’- National Indemnity Company, National Fire and Marine Insurance Company. This was the beginning of phenomenal success story of Berkshire. Buffett stamped his authority on the investment business when he became the Chairman of Berkshire Hathaway Inc in 1970. Buffett’s net worth of $620 million brought his name in the Forbes List of 400 richest people, for the first time in 1979.
But this change of fortunes was unable to change Warren Buffett, the person. He is not like a typical billionaire. He still lives in the same home he bought in 1958; he drives his own car and pays his own taxes. Buffett is not only wealthy in money and intelligence but also in values as well. No wonder, Buffet is a regular feature in Forbes richest list year after year.

Investing Style

Warren Buffett is known as the Father of Value Investing and the Investment Industry takes inspiration from his unique style of investing. According to Buffett, the essence of value investing is to buy stocks at less than their intrinsic value giving an investor fair amount of Margin of Safety. Warren Buffet set a goal never to lose money irrespective of the market conditions.

He is always prepared to take calculated risks as he always does the planning beforehand. According to Warren Buffett “Noah did not start building the Ark when it was raining”. Buffett prefers to invest in simple and understandable businesses, checks out a company’s track record for ROE (Return on Equity) and tries to predict the growth of the company in next ten years.

He prefers to invest in companies that generate high ROE without much debt. One of his principles was to invest in good companies when they have a temporary problem or when the stock market is low and creating bargain prices for outstanding businesses.

He does not care about the switching nature of the stock market. For e.g. – the stock of the Coca-Cola Company had gone up fivefold the prior six years and over five-hundred fold the previous sixty years when Buffett bought stocks worth $1 billion in Coca-Cola. He earned four times the money he invested and the profit still continues to come in. In 1976 he purchased a very important position in GEICO when the stock had fallen down from $61 to $2 and the basic opinion was that the stock was definitely going to zero.

Warren Buffett avoided Pharma or Dot Com Companies for he never invests in a business that he is unable to understand or falls under his circle of competence. He says that an investor should carefully study the facts and figures, value the company’s future outlook, and purchase when everything is in their favor. They should not try to predict the direction of the stock market, the economy, interest rates, or elections. The investors should concentrate only on a few holdings. This way, the investors can be more careful and thorough in their research. And it helps to eliminate the risk factor.

The Buy and Hold Investment strategy of Buffett has been appreciated by investors all over. The concept is to buy an outstanding business and hold it for years. This helps to achieve returns which are commensurate with the economics of Business.

Warren Buffett prefers to invest in companies which can provide their own management. Berkshire tries to work with the same management which was there before its purchase. The only area which is to the concern of Buffett is capital allocation and compensation of top managers. Otherwise, managers are free to operate as they like. But Buffett also welcomes any matter on a business environment which his managers want to discuss with him. It is indeed the strength of Buffett’s Principles that makes him so successful in the investment industry.

Warren Buffett: A symbol of Greatness

Warren Buffett is all about ‘Simple Living, High Thinking’. He also has many hobbies and knows how to enjoy life as well.

Warren Buffett is a great player of the game, ‘Bridge’. He has worked in an animated series which features Buffett and Munger and teaches children healthy financial habits. He also follows the Nebraska Football and he takes time out to watch the matches.

As a philanthropist also he has gathered much respect. He auctioned his Car to raise money for Girls and auctioned a luncheon with himself for a charity. In 2006, he announced a plan to give away his fortune to charity, with 83% of it going to the Bill & Melinda Gates Foundation.

Buffett married Susan Buffett Thompson in 1952. They got separated but Warren Buffett never married again. They had three children, Susie, Howard, and Peter. He says – “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing”.

This statement is an apt example of his greatness. It is not surprising that there are many books written in honor of Warren Buffett. But his personal favorite is a collection of his essays called The Essays of Warren Buffett, which he described as “a coherent rearrangement of ideas from my annual report letters” as edited by Larry Cunningham.

Warren Buffett’s life is an apt example of Intelligence when combined with action leads to success. According to Buffett “You only have to do a very few things right in your life, so long as you don’t do too many things wrong.” And this genius continues to march ahead in the new pastures of possibilities.

Famous Quotes

Here are some famous Warren Buffett quotes

1. “Rule Number one Number one – Don’t lose the money and number two – don’t forget rule number 1!”
2. “An investor needs to do very few things right as long as he or she avoids big mistakes.”
3. “It is not necessary to do extraordinary things to get extraordinary results.”
4. “If past history was all there was to the game, the richest people would be librarians.”
5. “Price is what you pay. Value is what you get.”
6. “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
7. “I always knew I was going to be rich. I don’t think I ever doubted it for a minute.”
8. “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”
9. “If a business does well, the stock eventually follows.”
10. “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
11. “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
12. “Risk comes from not knowing what you’re doing.”
13. ”Never invest in a business you cannot understand.”
14. ”Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.”
15. ”Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.”
16. ”As far as you are concerned, the stock market does not exist. Ignore it.”
17. ”Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”
18. ”It’s only when the tide goes out that you learn who’s been swimming naked.”
19. ”We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
20. “Our favorite holding period is forever.”

Warren Buffett is the most successful investors are living times and is one of the very few billionaires who has amassed wealth majorly through investing in stocks. Warren Buffett is bestowed with titles like “The Oracle of Omaha” and the “Sage of Omaha”. Warren Buffett continues to shine brightly as an Investor, Businessman and Philanthropist. With a net worth of US $37 billion in 2009, Warren Edward Buffett is ranked as the second richest man in the world, just after his good friend Bill Gates who had the net worth of $40 Billion.