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Business Leader, Philanthropist(1930)
Born in Nebraska in 1930, Warren Buffett demonstrated keen business abilities at a young age.
He formed Buffett Partnership Ltd. in 1956, and by 1965 he had assumed control of Berkshire
Hathaway. Overseeing the growth of a conglomerate with holdings in the media, insurance,
energy and food and beverage industries, Buffett became one of the world's richest men and a
celebrated philanthropist.
Early Life
Businessman and investor. Born Warren Edward Buffett on August 30, 1930, in Omaha,
Nebraska. Buffett's father, Howard, worked as stockbroker and served as a U.S. congressman.
His mother, Leila Stahl Buffett, was a homemaker. Buffett was the second of three children and
the only boy.
Buffett demonstrated a knack for financial and business matters early in his childhood. Friends
and acquaintances have said the young boy was a mathematical prodigy who could add large
columns of numbers in his head, a talent he occasionally demonstrated in his later years.
Warren often visited his father's stockbrokerage shop as a child, and chalked in the stock prices
on the blackboard in the office. At 11 years old he made his first investment, buying three shares
of Cities Service Preferred at $38 per share. The stock quickly dropped to only $27, but Buffett
held on tenaciously until they reached $40. He sold his shares at a small profit, but regretted the
decision when Cities Service shot up to nearly $200 a share. He later cited this experience as an
early lesson in patience in investing.
Warren Buffett at a Town Hall rally for Democratic presidential candidate Hillary Clinton at
Sokol Auditorium on December 16, 2015 in Omaha, Nebraska. (Photo: Steve Pope/Getty
Images)
In 2016, Buffett launched Drive2Vote, a web site aimed at encouraging people in his Nebraska
community to exercise their right to vote - and to assist in registering and driving voters to a
polling location if they needed a ride. Hes been a vocal supporter of Democratic
nominee Hillary Clinton, whom hed endorsed in 2015. He also challenged the Republican
nominee, Donald Trump, to meet and share their tax returns. "I will meet him in Omaha or Mar-
a-Lago or, he can pick the place, anytime between now and election. I'll bring my return, he'll
bring his return. We're both under audit. And believe me, nobody's going to stop us from talking
about what's on those returns, said Buffett at an August 1st rally in Omaha. Unlike other
presidential candidates since the 1970s, to date, Trump has refused to make his tax returns
public.
Warren Buffett: Success Story
Warren Buffetts name is practically synonymous with his biggest success: Berkshire
Hathaway (BRK.A). Warren became an integral part of Berkshire Hathaway in the
early 1960s and helped the company expand into one of the largest conglomerates in the world.
In 1956, his path to success began to accelerate when he moved back to Nebraska with his
family.
Before working for Benjamin Graham, Warren had been an investment salesman a job that he
liked doing, except when the stocks he suggested dropped in value and lost money for his clients.
To minimize the potential of having irate clients, Warren started a partnership with his close
friends and family. The partnership had unique restrictions attached to it: Warren himself would
invest only $100 and, through re-invested management fees, would grow his stake in the
partnership. Warren would take half of the partnerships gains over 4% and would repay the
partnership a quarter of any loss incurred. Furthermore, money could only be added or
withdrawn from the partnership on December 31st, and partners would have no input about the
investments in the partnership.
By 1959, Warren had opened a total of seven partnerships and had a 9.5% stake in more than a
million dollars of partnership assets. Three years later, Warren was now a millionaire and merged
all of his partnerships into a single entity.
1. Warren
Buffett:
His Life
and
Educati
on
2. Warren
Buffett:
Success
Story
3. Warren
Buffett:
Net
Worth
&
Current
Influenc
e
4. Warren
Buffett:
Most
Influent
ial
Quotes
Warren Buffetts name is practically synonymous with his biggest success: Berkshire
Hathaway (BRK.A). Warren became an integral part of Berkshire Hathaway in the
early 1960s and helped the company expand into one of the largest conglomerates in the world.
In 1956, his path to success began to accelerate when he moved back to Nebraska with his
family.
Before working for Benjamin Graham, Warren had been an investment salesman a job that he
liked doing, except when the stocks he suggested dropped in value and lost money for his clients.
To minimize the potential of having irate clients, Warren started a partnership with his close
friends and family. The partnership had unique restrictions attached to it: Warren himself would
invest only $100 and, through re-invested management fees, would grow his stake in the
partnership. Warren would take half of the partnerships gains over 4% and would repay the
partnership a quarter of any loss incurred. Furthermore, money could only be added or
withdrawn from the partnership on December 31st, and partners would have no input about the
investments in the partnership.
By 1959, Warren had opened a total of seven partnerships and had a 9.5% stake in more than a
million dollars of partnership assets. Three years later, Warren was now a millionaire and merged
all of his partnerships into a single entity.
In 1962, Warren saw an opportunity to invest in a New England textile company called Berkshire
Hathaway and bought some of its stock. Warren began to aggressively buy shares after a dispute
with its management convinced him that the company needed a change in leadership. Ironically,
the purchase of Berkshire Hathaway is one of Warrens major regrets. (For more, see: Always
Bet On Berkshire Hathaway.)
Understanding the beauty of owning insurance companies clients pay premiums today to
possibly receive payments decades later Warren used Berkshire Hathaway as a holding
company to buy National Indemnity Company (the first of many insurance companies he would
buy) and used its substantial cash flow to finance further acquisitions.
As a value investor, Warren is a sort of Jack-of-all-trades when it comes to industry knowledge.
Berkshire Hathaway is a great example. Buffett saw a company that was cheap and bought it,
regardless of the fact that he wasnt an expert in textile manufacturing. Over the decades, Warren
has bought, held and sold companies in a variety of different industries.
Some of Berkshire Hathaways most well-known subsidiaries are, but not limited to, GEICO
(yes, that little Gecko belongs to Warren Buffett), Dairy Queen, NetJets, Benjamin Moore & Co.,
and Fruit of the Loom. Again, these are only a handful of companies of which Berkshire
Hathaway has a majority share.
The company also has interests in many other companies, including American Express Co.
(AXP), Costco Wholesale Corp. (COST), DirectTV (DTV), General Electric Co. (GE), General
Motors Co. (GM), Coca-Cola Co. (KO), International Business Machines Corp. (IBM), Wal-
Mart Stores Inc. (WMT), Proctor & Gamble Co. (PG) and Wells Fargo & Co. (WFC).
(related: How Does Warren Buffett Choose The Companies He Buys?)
Business for Buffett hasnt always been rosy though. In 1975, Buffett and his business partner,
Charlie Munger, were investigated by the Securities and Exchange Commission (SEC) for fraud.
The two maintained that they had done nothing wrong and that the purchase of Wesco Financial
Corporation only looked suspicious because of their complex system of businesses.
Further trouble came with a large investment in Salomon Inc. In 1991, news broke of a trader
breaking Treasury bidding rules on multiple occasions, and only through intense negotiations
with the Treasury did Buffett manage to stave off a ban on buying Treasury notes and subsequent
bankruptcy for the firm.
In more recent years, Buffett has acted as a financier and facilitator of major transactions. During
the Great Recession, Warren invested and lent money to companies that were facing financial
disaster. Seven years later, the effects of these transactions are surfacing and theyre enormous:
A loan to Mars Inc. resulted in a $680 million profit
Wells Fargo & Co. (WFC), of which Berkshire Hathaway bought almost 120
million shares during the Great Recession, is up 6.75 times from its 2009 low
American Express Co. (AXP) is up about five times since Warrens investment in 2008
Bank of America Corp. (BAC) pays $300 million a year and Berkshire Hathaway has the
option to buy additional shares at around $7 each less than half of what it trades at
today
Goldman Sachs Group Inc. (GS) paid out $500 million in dividends a year and a $500
million redemption bonus when they repurchased the shares.
Most recently, Warren has partnered up with 3G Capital to merge J.H. Heinz Company and Kraft
Foods to create the Kraft Heinz Food Company (KHC). The new company is the third largest
food and beverage company in North America and fifth largest in the world, and boasts annual
revenues of $28 billion.
Modesty and quiet living meant that it took Forbes some time to notice Warren and add him to
the list of richest Americans, but when they finally did in 1985, he was already a billionaire.
Early investors in Berkshire Hathaway could have bought in as low as $275 a share and by 2014
the stock price had reached $200,000, and was trading around $220,000 earlier this year.
How Warren Buffett Made Berkshire A Winner
Berkshire Fine Spinning Associated and Hathaway Manufacturing Company merged in 1955 to
form Berkshire Hathaway.
Warren Buffett bought into it in the 1960s and turned it into a conglomerate in 1967. He used the
textile proceeds to buy National Indemnity. It was the first of many insurance company
purchases that provided Berkshire with the means to make more acquisitions.
Berkshire used float money for its purchases. Thats money paid to Berkshires insurance
companies in premiums that have yet to be paid out to cover claims. Technically, the money
doesnt belong to the insurance companies, and its available to be invested as the manager sees
fit.
Berkshires float of $77 billion is the worlds largest, and 50 times what it was a generation ago.
It lets Berkshire quickly buy temporarily wounded companies and then revive them. Fruit of the
Loom, purchased for $835 million in 2002 after its stock had fallen 97%, is a good example.
Meanwhile, many of the Fortune 500 companies in which Berkshire owns positions pay steady
dividends. Buffett advocates investing in companies that pay dividends, but despite that, he
himself gives none to Berkshires investors. They should not complain, however. Berkshires
stock has climbed 693,518% over the past half century, going from $275 a share in 1980 to
$186,000 in 2014.
The rationale is simple would you rather have a dividend, or see that money reinvested into one
of the most financially robust companies in the world?
How Warren Buffett made Berkshire Hathaway a World-beater
BRK.A
247,004.85
-0.45%
BRK.B
164.76
-0.43%
It would almost be easier to list the industry sectors in which Omaha-based Berkshire Hathaway
Inc. (NYSE:BRK.A
Coca-Cola Co
KO
44.90
+1.14%
), American Express Co. (NYSE:AXP
American Express Co
AXP
77.06
-0.18%
) each have a steady history of maintaining or increasing dividends every year. Coca Cola has
increased its annual dividend 54 years in a row.
While imprudent speculators chase hot stocks whose prices are rising, those speculators patient
brethren instead load up on the stocks of companies with fundamentals formidable enough to
allow regular cash payments to shareholders. For some reason financial news outlets rarely
showcase dividend data the way they do stock price and price movement figures, even though
dividends provide one of the surest measures of a companys potency. After all, management will
hand cash over to owners only when operations turn a large enough profit to make said payments
feasible. As much as any other factor, the company chairmans love for receiving dividends has
made Berkshire Hathaway so consistently successful.
But Pay A Dividend? No Way!
Somewhat unsurprisingly, the same Warren Buffett who advocates investing in companies that
pay dividends eschews paying them out to his own companys investors. On the surface of it, this
seems so self-evident that it barely counts as an observation it makes sense to take the cash that
other companies offer you, but never to pay cash out yourself unnecessarily. The next time
Berkshire Hathaway pays a dividend will be not the first, but close. In 1967 the company paid
its only dividend, totaling 10 cents a share. To this day, Buffett claims that he must have been in
the bathroom when the dividend was authorized.
That being said, it would take galactic-class chutzpah for any Berkshire Hathaway shareholder to
complain about the companys refusal to pay dividends. The stock price has gained over
$240,000 over the past 51 years, trading at $275 in 1980, $32,500 in 1995, and around $245,000
today, a track record that lacks a meaningful comparison. Berkshire Hathaways rationale is
simple, and hard to assail: If youre an investor, would you rather have a dividend payment for
you to spend or invest at your peril, or would you rather that money be reinvested by the team
that turned a humble textile investment into one of the largest, most respected and most
financially robust companies in existence?
Since a single share of Berkshire Hathaway Class A stock (thats the class quoted above) is
equivalent to several years worth of the average American salary, its no wonder that shares
trades infrequently: maybe 300 or 400 change hands a day. Buffett has never entertained the
notion of a Class A split, arguing that to do so would invite speculation. However, he did
authorize the creation of Class B (NYSE:BRK.B
He lives in the same Omaha residence he bought in 1958 for $31,500, the equivalent of roughly
$270,000 in 2017 dollars. Buffett has no intention of putting his own home up for sale. I
wouldnt trade it for anything, he said.
In todays money, Buffett would have paid about $41 per square foot for the 6,570-square-foot
home. But these days, youll pay about $180 per square foot for a home in Omaha of that size
and era, including one listed across the street from the multi-billionaire.
If you want to live like Buffett, consider buying less home than you can afford. Instead of paying
pricey mortgage payments, youll be able to put more of your money toward savings, retirement
or vacations. And if you must take out a loan, consider getting a 30-year mortgage. Its the best
instrument in the world, Buffett told CNBC. Buffett took out a 30-year mortgage in 1971 when
he bought a vacation home in California.
If youre wrong and rates go to 2 percent, which I dont think they will, you pay it off, he said.
Its a one-way renegotiation. It is an incredibly attractive instrument for the homeowner and
youve got a one-way bet.
Wrong. Adopting Buffetts lifestyle doesnt include paying high prices for daily gourmet French
toast prepared in the comforts of your own home.
When it comes to food, the billionaire investor has been known to save money by taking the fast
food route. In fact, he might kick off his day with a trip to McDonalds during his five-minute
drive to work, reports CNBC.
If hes feeling prosperous, hell splurge by spending $3.17 on a bacon, egg and cheese biscuit
sandwich. If the markets down, he might spend $2.95 on a sausage, egg and cheese sandwich
instead. On a really bad day, he buys two sausage patties for $2.61, puts them together and
washes it down with a Coke.
Buffett is also known to eat cheap when hes on the road. But forget the cholesterol-soaked
bacon and eggs at a local restaurant. Buffetts travel breakfast might consist of a pack of Oreos,
his friend Bill Gates yes, his good buddy is the Microsoft founder wrote on his blog.
One thing that was surprising to learn about Warren is that he has basically stuck to eating what
he liked when he was 6 years old, wrote Gates. He did move past baby food, of course, but he
mostly eats hamburgers, ice cream and Coke.
Buffett explained his bizarre but cheap diet in an interview with Fortune: I checked the actuarial
tables, and the lowest death rate is among 6-year-olds. So I decided to eat like a 6-year-old. Its
the safest course I can take.
Buffett drives the same car for years.
Although some CEOs drive around in multimillion-dollar cars, youll likely find Buffett driving
something much more modest. In a BBC documentary, his daughter said he bought cars that he
could get at reduced prices, like those that were hail-damaged. The cars were fixed and didnt
look hail-damaged and became a regular part of the Buffett lifestyle.
Youve got to understand, he keeps cars until I tell him, This is getting embarrassing time
for a new car,' said his daughter in the documentary.
Buffett also told Forbes in 2014 about his car-buying habits or lack thereof. The truth is, I
only drive about 3,500 miles a year so I will buy a new car very infrequently, he said.
Remember this the next youre in the market for a car: Since cars tend to depreciate quickly, it
can be better for your finances if you try to keep your well-working car for as long as possible
or at least opt to buy a used car instead of new.
If I play bridge and a naked woman walks by, I dont even see her, laughed Buffett during a
CBS News Sunday Morning interview. Yep, Buffett is a self-proclaimed bridge addict, and you
might even catch him playing the game about 12 hours a week.
I one time said that I wouldnt mind going to jail if I had the right three cellmates so we can
play bridge all the time, he said in the interview.
When Buffetts not counting cards or investing a ton of money, you might also find him
strumming his ukulele and singing. Hes played for investors, on live television and at charity
events, reports CNBC. He and Gates even went viral after a video was posted on Gates blog last
summer.
Buffett treats his friends well, but not extravagantly.
What do you give a friend whos also a billionaire? Buffetts long-standing friendship with Gates
is legendary. The Microsoft magnate explained on his blog whats kept their friendship strong
over the years:
Ive learned many things from Warren over the last 25 years, but maybe the most important
thing is what friendship is all about, he said. Its about being the kind of friend you wish you
had yourself. Everyone should be lucky enough to have a friend who is as thoughtful and kind as
Warren. He goes out of the way to make people feel good about themselves and share his joy
about life.
And those special touches dont have to be expensive. For example, Buffett drives personally to
the airport to pick Gates up whenever hes in town, calls frequently and sends news clippings by
mail that he thinks Gates and his wife will enjoy. Those special touches that mean a lot to friends
just might be the best takeaway for those seeking to live the Warren Buffett lifestyle.
1. Kraft Heinz
Berkshire's massive stake in Kraft Heinz (NASDAQ:KHC) resulted from the merger of Heinz --
which Berkshire owned -- with Kraft Foods. Buffett already loved Heinz for its valuable brand
and dominant market position (think about it -- can you even name the number two brand of
ketchup?). The combination with Kraft Foods was a no-brainer, as it added economies of scale to
two already solid food businesses.
2. USG Corp.
Construction materials company USG (NYSE:USG) is Berkshire's second-largest stake by
percentage and is known for its Sheetrock brand of drywall, as well as other building materials,
such as roofboard, insulation, and more. Warren Buffett played a major role in USG's turnaround
a few years ago and is now well-positioned to profit from the expected increase in U.S.
infrastructure spending, as my colleague Neha Chamaria recently explained.
3. DaVita Inc.
Healthcare company DaVita (NYSE:DVA) provides dialysis services in the U.S. and has more
than one-third of the market. What's more, the company's revenue has steadily grown over the
past decade or so. And since the company provides a non-discretionary (needed) service, its
business should do just fine, no matter what the economy is doing.
4. American Express
American Express (NYSE:AXP) has a lot of qualities that Buffett loves to see. According to
Interbrand, American Express has the 25th most valuable brand in the world, worth more than
$18 billion. That's more than Visa or MasterCard, which ranked 61st and 76th, respectively. The
company also has a desirable, affluent cardholder base that gives it pricing power over rivals.
Even with the emergence of new payment technologies, Buffett has recently stated that he's
sticking with Amex as a long-term investment.
5. Phillips 66
Oil giant Phillips 66 (NYSE:PSX) is a relatively new investment in Warren Buffett's portfolio,
with the company adding shares several times over the past couple of years. The oil refining
business has high barriers to entry and excellent cash flow, both of which Buffett loves to see. In
addition, Phillips 66 has a diverse revenue stream: Some of its business actually does better when
oil prices are low, meaning that it works in any economy.
6. Moody's Corp.
Warren Buffett has been an investor in Moody's (NYSE:MCO) for some time now. The credit
rating agency is in a high-barrier-to-entry industry and generates a lot of capital without
requiring much money to grow. Basically, as long as the need for credit ratings exists, Moody's
should do just fine. Furthermore, its shareholder-friendly management has done a great job of
returning capital to shareholders through aggressive buybacks and ever-increasing dividends.
7. Verisign Inc.
Warren Buffett -- or more likely, one of his stock-pickers -- picked up a stake in Verisign
(NASDAQ:VRSN) in 2013. And just like the other stocks on this list, the internet registry
company has several Buffett-stock qualities. The company is a leader in its industry, has a strong
brand, and produces excellent recurring cash flow.
In addition, Berkshire's stakes in Coca-Cola, Axalta, and American Airlines are all above 9% of
each company's total outstanding shares. The bottom line is that in addition to its wholly-owned
businesses, Berkshire has some rather large (and in some cases, very influential) stakes in
publicly traded businesses, many of which are large, household names.