curiouscat.com > Books > Investment > Investors > Warren Buffett
Other Investors: Darvas, Livermore, O'Neil, more
Related Curious Cat Blog posts: Investing blog, Warren Buffet - Management blog, Warren Buffet
Warren Edward Buffett (born August 30, 1930), nicknamed the "Oracle of Omaha," has amassed a substantial fortune from astute investments through his company Berkshire Hathaway (he owns 38% of the company). In 2008 was ranked by Forbes as the richest person in the world with an estimated net worth of approximately $62 billion. In 2009, Buffett was ranked as the second richest man in the World (behind his friend Bill Gates) with a net worth of $40 billion (after he donated billions of dollars to charity).
Buffett was born in Omaha, Nebraska. His father Howard Buffett was a stockbroker and member of Congress. Buffett was educated at the University of Nebraska (transferring there from the Wharton School of Finance and Commerce at the University of Pennsylvania) and took a Master's in economics at Columbia University, studying under Benjamin Graham. He went on to work for Graham at Graham-Newman where he followed Graham's value investing rules. Buffett returned to Omaha in 1957 and started his own investment partnership, putting in his own money and raising additional investments from friends and family. By 1969, he had returned an average of almost 30% a year, in a market where 7% to 11% is the norm. Since then, while not averaging 30% a year the returns have continued to be very impressive.
He married Susan Thompson in 1952. They separated in 1977 but remained married. She was a significant stockholder in Berkshire Hathaway and a board member. Mrs. Buffett died on in 2004 from a stroke. Buffett lives with Astrid Menks; his late wife largely resided in San Francisco in recent years. He has three children.
He has stated his intention to disburse 99% of his wealth after his death to good causes. His friend, Bill Gates, has also said that he will give nearly all his wealth to charity upon his death. Mr. Buffett has been an outspoken opponent of the trend to rework the tax code of the United States to reward the children of the wealthy. The politicians have redrawn the tax code to reward the children of those who are incredibly financially successful by allowing those children to inherit huge sums of money without taxation.Investments
One of his earliest investments was in American Express. Among the companies he invested in was Berkshire Hathaway, a New Bedford textile company. Buffett eventually liquidated the textile business but kept the name and turned the shell of the company into a investment business, notably in the insurance field, which generated a steady cash flow for further investment.
Buffett customarily focuses his investments in undervalued companies with good long-term growth potential. Identifying such companies is the difficult part. The actual value generated is more by the companies he owns than stock market investments, although his stock ownership in companies such as Coca-Cola, of which Berkshire Hathaway is the largest single shareholder, and Gillette attracts more attention. Buffett famously avoids high-tech companies, not because they are inherently less desirable, but because he prefers businesses he understands.
Buffett, through Berkshire Hathaway, also owns insurance companies like Geico and General Re that generate substantial free cash flow relative to the company's price. These companies are a source of funds that he then allocates to Berkshire Hathaway's subsidiaries and uses to acquire new companies.
Buffett is still living in the same house in Nebraska that he paid $57,000 for in the 1940/1950s. Also he is a huge fan of The Coca Cola Company and he drinks about 15 cans of Coke each day.Views on investing and economics
In terms of his personal life he is famously frugal. He is only paid $100,000 a year by Berkshire Hathaway by his own choice, with the bulk of his disposable income coming from his other personal investments outside of Berkshire, even though these apparently constitute less than 1% of his overall net worth (Berkshire has not paid cash dividends for decades). He makes charitable donations through the Buffett Foundation, usually around $12 million a year in total. He has stated his intention to disburse 99% of his wealth after his death to good causes.
Buffett believes that much of the problem with the economies of the United States and other industrialized countries in recent years results from the proliferation of persons and organizations who produce nothing directly but are compensated based on the volume of business which they transact. He feels that most stock trades are recommended and made primarily to benefit the brokers rather than the investors and has stated that he feels that the world would benefit if each person had a lifetime maximum of twenty stock trades. He steadfastly refuses to split Berkshire Hathaway stock because the purpose of this would be to facilitate trading, which he has no desire to do.
He states that he sees his fellow Berkshire Hathaway investors as partners and hopes that they take their investment likewise, as a long-term or lifelong investment; he discourages those with a short-term view from investing in Berkshire Hathaway. He prefers Berkshire Hathaway shareholders actually to take physical possession of their share certificates rather than allowing their shares to be held by a brokerage firm in "street name" and before 2003 made a contribution for each "A" share held directly by a shareholder to a recognized charity of their choice; the contributions on behalf of those otherwise entitled to direct them but whose shares are held in brokerage accounts were forfeited. In 2003 Berkshire Hathaway terminated the program due to boycotts on subsidiary companies related to donations made to abortion-related recipients.
Buffett normally supports democratic candidates and contends that the George W. Bush tax policy unfairly burdens the middle class. However, he is also a confidante of California governor Arnold Schwarzenegger, a Republican.
His main business associate is Charlie Munger, once a lawyer with Munger, Tolles & Olson and now CEO of Berkshire Hathaway subsidiary Wesco Financial Corporation and vice-chairman of Berkshire Hathaway.
Buffett's annual report to Berkshire Hathaway shareholders should be read by all serious investors.Related Books
This biography is an edited version of Buffett on the Wikipedia site, by John Hunter Feb 2005. Updated 2009.