WARREN BUFFET:THE "ORACLE OF OMAHA"

He ranks among the wealthiest men on planet earth, according to Forbes.com, so why not share his biography so that we can get inspired!

Warren Buffett, the man who we've all
come to know as the " Oracle of
Omaha ," was born in Omaha ,
Nebraska. His dad was a man named
Howard Buffett . Howard was a
stockbroker and United States
Representative . Warren 's mom was
named Leila Buffett . The young Buffett
began working at his father' s
brokerage at the age of 11 . It was
around this time that he made his first
stock purchase. Warren bought shares
of a company called Cities Services for
$38 each. He later sold the shares of
Cities Services stock when the price
reached approximately $ 40, only to
see them rocket to $ 200 a few years
later. This taught him the importance
of investing in good companies for
the long term . At the age of 14 he
spent $ 1, 200 he had saved up from
two paper routes to buy 40 acres of
farmland which he then rented to
tenant farmers.

The Wharton School at the University
of Pennsylvania was where Warren
Buffett initially went to school.
However, he later transferred to the
University of Nebraska. There he
began his interest in investing after
reading Benjamin Graham 's The
Intelligent Investor . He obtained a
Master' s degree in economics in 1951
at Columbia Business School , studying
under Benjamin Graham , alongside
other future value investors including
Walter Schloss and Irving Kahn .

This is something few people realize,
but another important influence on
Warren 's investment philosophy was
the well known investor and writer
Philip Fisher. Odds are you might
never have even heard of him. Well,
after Warren earned the only A+
Benjamin Graham ever handed out to
a student in his securities analysis
class, Buffett wanted to work at
Graham-Newman but was initially
turned down. ( Can you imagine that?!)
Warren instead went to work at his
father's brokerage firm as a
representative until Graham offered
him a position in 1954. Warren Buffett
returned to Omaha two years later,
when Graham retired .

Buffett established Buffett Associates,
Ltd. , his first investment partnership,
in 1956. It was financed by $ 100 from
Buffett, the general partner, and
$105 , 000 from seven limited partners
consisting of Buffett' s family and
friends. Buffett created several
additional partnerships which were
later consolidated as Buffett
Partnership Limited . He ran the
partnerships out of his bedroom,
adhering closely to Graham' s
investment approach and
compensation structure. These
investments made in excess of 30%
compounded annually between 1956
to 1969 , in a market where 7 % to 11%
was the norm . Buffett employed a
three- pronged approach:

GENERALS: undervalued securities that
possess margin of safety and meet
expected return- to-risk characteristics .

ARBITRAGES: company events that are
not related to broader market
changes, such as mergers and
acquisitions, liquidation, etc .

CONTROLS : build sizeable holdings , ally with other shareholders or employ
proxies to affect changes in
companies.

In 1962 Buffett Partnerships began
purchasing shares of Berkshire
Hathaway, a large manufacturing
company in the declining textile
industry that was selling below its
working capital . Buffett would
eventually dissolve all his partnerships
to focus on running Berkshire
Hathaway. At the time, Charlie
Munger, Berkshire' s current Vice
Chairman, remarked that purchasing
the company was a mistake, due to
the failure of the textile industry .
Berkshire, however , became one of
the largest holding companies in the
world, as Buffett redirected the
company 's excess cash to acquire
private businesses and stocks of
public companies . At the core of his
strategy were insurance companies ,
due to the large cash reserves (" float")
they must keep on hand to pay out
future claims. Essentially , the insurer
does not own the float, but may invest
it and keep any proceeds.

Under the influence of his friend and
business partner Charlie Munger,
Buffett's investment approach moved
away from a strict adherence to
Graham's principles, and he began to
focus on high-quality businesses with
enduring competitive advantages. He
described such advantages as a
"moat " that kept rivals at a safe
distance, as opposed to commodity
businesses , which sell
undifferentiated products and face
direct competition. A classic example
of a wide -moat company is Coca- Cola,
because consumers are willing to pay
more for a Coke than for a generic
beverage with a similar taste . On the
other hand , salt is considered a
commodity product because
consumers generally have no
preferences for one brand of salt over
another.

Investment in wide -moat businesses
has become a hallmark of Berkshire
Hathaway, particularly when buying
whole companies rather than public
stocks. As a result, it now owns a large
number of businesses which are
dominant players in their respective
industries, specialize in various niche
markets, or possess other unique
characteristics to separate them from
their competitors .

My hope is that you got inspired by the great investor's biography.

Source: www.warrenbuffettbiography.net/