Biographies: Warren Buffett

Since the name of this blog is “Buffett’s Smile”, the first biography could not be another person. I understand that most of you would know many things about his life and all related to Warren Buffett, but he is a compulsory bibliographic reference inside the Value Investing world. I know that there are many things to say about Warren Buffett, but I will try to summarize the most important aspects of his life, investing approach, achievement, quotes, etc.

Buffett’s life

Warren Edward Buffett, also known as “the Oracle of Omaha”, was born 30 August 1930 in Omaha, Nebraska (USA).

He studied in Nebraska University, and after that, a master’s degree in Columbia Business School, where he was student of Benjamin Graham, authors of books such as “Security Analysis” or “The intelligent Investor”.

After that period, he worked with Graham, following the investment rules of this master. He came back to Omaha in 1956 without any plan in his mind, since some people asked him to manage their investments. Warren Buffett started that way.

In 1965, he bought a company of the textile sector with financial problems, called Berkshire Hathaway. It was transformed in a holding for his investments in media, insurance and consumer products, among others. Buffett bought several of these companies at a very low price in the 1973/1974 recession.

Nowadays, he is still managing Berkshire Hathaway. His last purchases were stocks of companies such as Tesco retailer (where I buy my food here in Dublin), Kraft Foods Company and rail transportation company Burlington Northern Santa Fe.

His political ideas are related to the Democratic Party. He has positioned himself several times in favour of an increase on taxes for the richest people and in favour of an increase on inheritance tax, since, according to Buffett, it is an obstacle to meritocracy.

Buffett is also famous by its philanthropy. In fact, he has gone down in history thanks to its donation to Bill & Melinda Gates Foundation, of over 30 billion, which is the highest donation in history.

Investing Approach

Warren Buffet is the best representative in Value Investing. The main characteristics of his investments are the following:

• Simplicity: They are easy to understand and manage.
• Predictability: Their profits can be forecasted with relative accuracy.
• High return on equity, obtained without accountancy tricks or excessive indebtedness.
• High cash flow generation.
• Managed by people whose objective is to achieve shareholder value.
• Long-term investments.
• Never get carried away by trendy stocks.

Achievements

Buffett is the most successful long-term investor, with a compounded annual rate of return of 22.3% during 36 years, which means 128,515%.

The purchase of Coca-Cola stocks by Buffett meant for Berkshire’s Shareholders a profitability of near 800% in 12 years. Another less well-known investment was the purchase of Interpublic marketing company in 1973, with a profitability of over 900% in 11 years.

Buffett es el inversor a largo plazo con más éxito de todos los tiempos, con una tasa de retorno compuesta de 22,3% durante 36 años, lo que equivale a un 128.515%.

He bought Berkshire Hathaway’s shares at a price between $7.60 and $14.86. Berkshire Hathaway’s current share price is over $140.000.

His estimated net worth is $56.9 billion.

Curiosities

He filled his first tax form at the age of 13 in order to deduct its bicycle as a work expense.

His favourite drink is Cherry Coke.

His favourite music instrument is ukulele. In fact, he plays ukulele in each Berkshire Hathaway’s Annual Shareholder Meeting.

Warren is still living in the house that he bought in 1958 for $31,500. Nowadays, that house is worth $700,000.

Buffett was the only student who got a mark of “A+” with Benjamin Graham as professor.

His salary is $100,000 annually, the lowest salary of all chairmen of the 500 largest American companies.

Quotes

Warren Buffett has many famous and good quotes, most of them brilliant. I am going to show my favourites, but I want to encourage you to add your favourites to the comments.

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."

"Price is what you pay. Value is what you get."

“The dumbest reason in the world to buy a stock is because it's going up.”

Personal Opinion

There are very few people like Warren Buffett in the world. Warren in an example on how working hard, persevering and with clear ideas, people can go far, as much in life as in business. I would like to highlight three qualities of Buffett: simplicity, sensibility and integrity. Probably, these three qualities brought Warren Buffett to where he currently is. Finally, Warren, I wish you good luck in your life. Go on Mr. Buffett!

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