Many people believe that Warren Buffett is the best investor in the world, and not without reason. A man known not only in the United States, but throughout the world, lives in Omaha, Nebraska. He is 73 years old. He has the fifth largest state in the United States - at the end of 2012 amounting to 46.5 billion dollars. But with all this a large fortune did not turn his head, he tries to live modestly. Warren reminds those around him that it was not money that created man, but man - money, and encourages others to live easier. The billionaire also convinces compatriots to follow their example: do not chase brands, but use those things that are convenient.
Why is Warren Buffett loved in the United States?
An important fact that characterizes him as an individual is the voluntary renunciation of 50% of his property (and this is about $ 37 billion). With one stroke of the pen, he donated these funds to the American charitable foundations without hesitation. So he reacted to the call of Bill Gates in 2010 to wealthy Americans - to give half of his fortune to the country that made them rich. It was the largest in the world and really impressive act of charity, an example for all wealthy people. The funds were mainly transferred to a fund managed by the Gates spouses: Bill and Mellinda. Without exaggeration, the whole country was deeply surprised by this act of a man formerly famous for its economy. It was a truly patriotic act, a lively response of Buffett's soul to the attack of the American twin towers by terrorists.
He is really loved in his native Omaha, he, a billionaire with a worldwide reputation, does not hide from people, he freely visits shops and other public places.
Once, when one of the Omaha schools was faced with significant financial sanctions and the threat of closure, an elderly couple of teachers from the same school came to the rescue. They transferred several million dollars to the required account. Where did they get them from? Teachers were one of the first shareholders of the Buffett company, then charging him all their savings - 25 thousand dollars.
When asked by a correspondent about how he understands what life success is, he replied that the most important thing is loving people around, and how much you have in your bank cell is already secondary. Warren Buffett really has such beliefs. News, current events have little effect on his life values. Indeed, this intelligent, but wayward and charismatic person is loved by his family and others.
Warren Buffett - A Famous Business Name
Operations on the securities market are most often speculative. It is assumed, of course, to buy shares at low prices and sell at a higher rate. Many try to carry out two operations at once with lightning speed, and at the same time - as profitably as possible. But the hero of our article did not go about his enrichment through speculation, he, as experts say, is a “pure investor”. His style is different: measure seven times, cut one. The skate of a businessman is the purchase of shares in promising companies that the market subjectively underestimates. This flaw has the prospect of being fixed. The mere fact that Warren Buffett himself invested in this company enhances its reputation. He respects the companies - objects of his investments. He owns a phrase that should be heard by all investors. She says that it’s better to buy a great company by paying a fair price than to buy a fair company at a great price. Fundamental in the moral of the business of Warren Buffett. His statements testify to this.
He buys securities only from companies, only making sure that their real value is higher than offered. Moreover, such shares have been in his portfolio for at least ten years. Enterprises are operating steadily, and the value of their shares is growing at this time. He is not interested in short-term speculation, unlike George Soros. This position, of course, is constructive: production receives an impetus for development. The compatriots are sure: Warren Buffett is stimulating the US economy with his activity. Photos of this worthy person are often published by newspapers and magazines. He willingly gives interviews. This businessman and philanthropist is loved in the country and there is - for what ... After all, he fundamentally defends investments and criticizes speculation. He calls on other businessmen not to cross the border between these concepts, to be “for the whole country”, and not just “for ourselves.”
Its principle is to invest in enterprises with impeccable management. Therefore, he studies not only their balance, but also the production structure, as well as the biographies of managers. This investor resembles an agronomist looking for proper soil to plant grain in. His favorite investment option is when companies, thanks to investments, continue to grow consistently. Therefore, he selects undervalued assets. Talking about how to choose a company to invest, Buffett says in the words of his teacher Ben Graham that the meaning appears when comparing the price (the one that we pay) and the cost (what we get).
If we consider Warren Buffett as a stock investor, then his average annual income is only 24%. And this is in the sphere where it happens that the lucky ones “grab” a jackpot of 500%! How many such daredevils with brilliant one-time deals did Warren see? But luck for them is a fickle lady, and with the hero of our article she goes hand in hand for more than 50 years, without leaving him alone.
Buffett is sure that everything present is being tested by time, but speaks about it, as always, in an unbanal and figurative manner, using the following comparison: at low tide it becomes noticeable who bathed naked.
Why was he called the “Omaha Oracle”?
Everything that he did in life, literally everything, was successful. (Buffett's biography, reviewed in this article below, will convince you.) His predictions are astonishingly true. Everything that he said publicly is carefully analyzed. On Wall Street, no less than the word of the President of the country has what Warren Buffett will say. Quotes from his speech can even bring down a company. So, once speaking to his shareholders, he voiced his opinion that soon one of the large companies in the reinsurance market will collapse. Analysts, analyzing the debts of various companies to primary insurers, determined that this is the seventh-rated German insurance company Gerling Global Re in the world. Warren's statements were enough to stop the services of this truly loss-making company.
At the beginning of the new century, analysts were perplexed: why isn’t Buffett investing in the development of modern technologies? Journalists even scoffed at the old-fashioned billionaire, who does not use either a computer or a calculator (Warren from childhood determines profit by multiplying two- and three-digit numbers in his mind). However, after a couple of years, the NASDAQ technology market index began to decrease systematically, and investor companies suffered significant losses. What did Warren Buffett say to that? His quotes on this subject are laconic - “But I warned you ...”
In 2006, the famous investor predicted a catastrophe in the American real estate market. To do this, he used "his" indicator - housing prices should not grow much faster than costs. The events of 2007-2008 - housing purchased under mortgage by citizens began to be massively alienated from them for debts.
Concerned about the US budget deficit, it was in 2003 and 2004. twice predicted the depreciation of the US dollar, investing part of its funds in other currencies.
First steps in business
His father was the owner of a brokerage company and a congressman. However, from childhood Warren tried to earn his money and go about his business. His first deal was speculative: the boy bought several cans of Coca-Cola from his grandfather’s store and sold them twice as much at home. So began the path of Warren Buffett to business. At age 11, he first tried to play the courses, first buying and then selling three shares. Then he hastened to sell shares because of the minimum profit. However, their price soon increased six times. There was no need to rush. This served as a lesson to Warren.
From the age of thirteen, he worked at the post office, distributing the Washington Post. The work was piecework and, having developed his system, he began to earn more than the head of the post office. At the age of 15-17, they bought and installed three used slot machines in the city with a friend. By the age of 17, he had funds in the amount of 5 thousand dollars, which, in terms of the inflation index, amounted to more than 40 thousand dollars. Warren was “charged” to make money and become a millionaire by age 30. But his father convinced him of the need to get an education. The University of the District of Columbia brought him together with the prominent theoretician of the financial market and investments, Graham, who managed to interest the young man in his harmonious theory. Dao Warren Buffett was found! Now he knew very well what he would do in life - to invest.
Financial Market - Warren Buffett Calling
Upon completion of training, Warren began working as a manager in his father's company. At 22, he married Susan Thompson. Two years later, he organizes a company on shares of friends and acquaintances. He then had experience working with his teacher Ben Graham's company, the Wallham New York Graham Investment Fund. At this stage, he already has a fortune of 140 thousand US dollars. Despite the prospects, Warren decides to build his own business. He returns to Omaha and, having managed to attract funds from friends and relatives, establishes his company-fund "Buffett Associates". Since the beginning of the 60s, the shares of this company in the first 5 years have grown by 251%, while the average US stock market during this time has been "rising" by 74%. The next 5 years, this gap is further widened: 156% for companies invested by Warren and 122% for the rest of the market. A childhood dream comes true - he becomes a millionaire. Warren Buffett has established himself as a thin specialist in mergers and acquisitions. He has major investments in America's insurance business.
The second phase of his activity began in 1969, when he invested all the proceeds of the Buffett Associates fund (which is $ 102 million) into the bankrupt textile company Berkshire Hathaway, thereby giving her a boost to development. An experienced analyst noted, based on the valuation of assets, that the real price of one share was $ 20, while it was sold for 8. But the textile business was not the end point, but an intermediate base for the next investment. Profit from the sale of products was directed to them in the purchase of securities of insurance companies. America at that time was shaping its insurance market, and significant government benefits were the key to the high profitability of the insurance business. A wise and far-reaching strategy was chosen by Warren Buffett. His biography as an investor nationwide began precisely from this stage, when the five largest US insurance companies became his property.
In the future, an investment mechanism was launched based on the redistribution of clients' insurance premiums to these companies. For part of the funds received “in advance”, bankrupt “solid” companies were bought up. Having received financial support, almost immediately they went for profit. Thus, thanks to the profits of skillfully invested enterprises, Warren Buffett received another source of funding. His biography testifies: having exchanged the fifth decade, he became the owner of the 28 billionth fortune.
Omaha largest Oracle investment
His investment is more than convincing. Investing in companies that were underestimated by the market had a striking effect. Shares of Coca-Cola, bought by him for 1.3 billion dollars, rose in price to 13.4 billion dollars; Gillette - from $ 0.6 billion - up to $ 4.6 billion; and $ 0.01 billion invested in the Washington Post, $ 1 billion.
The billionaire also has a 4.3% stake in McDonalds.
Notice, this person invests in what is familiar to him from childhood and what is close to him as a person. Recall (we already talked about this) about the first commercial experience of the six-year-old Warren in selling to parents six cans of Coca-Cola, bought from his grandfather. Not only that, the Oracle daily drinks five jars of “Cherry Coke”. Or the Washington Post: wasn’t it that young Buffett carried it on a bicycle, earning the first decent income in his life? Namely, hamburgers are the favorite food of a brilliant investor.
The principles of investing Warren Buffett - thoughtful and successful, as verified by practice, have long been well known. They are organically consistent with his life principles.
Somehow in working order, gradually, in the process of management, Warren Buffett created an “Investment Essay”, in which he developed the ideas of Ben Graham. Initially, these were his business letters to the shareholders of a multidisciplinary corporation that grew out of the textile company Berkshire Hathaway (and still continues to bear this name). The reason for the publication of this book is purely practical: a reasonable formulation by the author of the ideas of the financial market and the destruction of the myths existing there. The nature of investment and building a business is subtly revealed. The author emphasizes that meaningful investments are impossible without a proper audit of accounting documents, analysis of the economic life of the company.
Having bought the company, Buffett appoints its CEO and determines the payment procedure for him. This is the only thing he does, the investor. Oracle did not concern operational management of the company from Omaha. The management structure has not changed. The director appointed by him, stimulated by the opportunity to participate in the stock option of the company, himself increased his capitalization.
Life principles of a great investor
First, the Omaha Oracle believes wealth is a state of mind. If a person associates himself with wealth, then he will become rich.
However, he does not associate human success only with a bank account. It is important that he do what he likes, and there are people around who love him. He also recommends that people learn to spend less than earn, not get involved in consumer loans. He recommends spending time with people who are better than you, as this will mobilize you for further progress. The last of the principles of the oracle says that those who want to receive more should also give more.
He is devoted to his company to such an extent that he holds 99% of his capital in its shares. By the way, his colleague Charlie Manger, following his example, also invested 90% of his fortune in the company's shares. This, according to Warren, is the best guarantee of the unanimity and unity of the shareholders of Berkshire Hathaway with its managers, necessary for its effective management. In 2004, after the death of his wife Susan Buffett, the board of directors included Warren's best friend, Bill Gates.
It should be noted the peculiarity of this company. For more than 40 years of its history, not a single share of Berkshire Hathaway has been sold. During this time, the value of each share increased from $ 8 (remember, when buying a textile company) to $ 90.5 thousand. The shareholders of this company, not least due to the charisma of its leader, are not scattered businessmen, but an elite club, a single, monolithic, charged to work together.
He does not like computers. In his house they do not have a single one. The only weakness of the Omaha Oracle is private jets.
Thrift or greed?
Despite his prosperity, he did not leave to live in the "state of millionaires" - California, he did not erect his own mind-boggling real estate. Although the funds allow him to build himself almost a city. Warren Buffett's house in Farnham Street was bought by him in the 50s in his native Omaha for 34 thousand dollars. He basically does not receive dividends from the corporation he owns (Berkshire Hathaway). Lives on a salary, rides a used Lincoln. Lunch in the same dining room where he ate, while still being a clerk.
He dresses in ordinary shops. Somehow he answered the question of the malicious journalist about the cost of his costumes in such a way that he made the whole of America laugh. As follows from his answer, the costumes are very expensive, they just look cheap on him.
Surprising those around the nimbleness of this person, even in relation to native children. When his son Howard wished to farm and asked his father to buy him a farm, he made a condition: he buys in his own name, and his son rents a farm from him, while paying him a rent. Susie's daughter once turned to him, asking for a small amount to pick up the car from the paid parking lot at the airport. Of course, he gave the money, but he asked his daughter to write a receipt for the $ 20 received.
Warren Buffett loves cartoons. Favorite - “Duck Tales” with Scrooge McDuck - the main character. It's not even about animation. The catchphrase of “duck redneck”: “Saved dollar - earned dollar” Walt Disney noticed and “stolen” from the protagonist of our article.
But there was a mistake
Is Warren Buffett a writer? He purposefully did not write books. But he worked so creatively that his letters to shareholders, collected and systematized, are published, readable and of value.
Only once - in 2005 the forecast of the great financier did not come true. He set the dollar to fall. It turned out the opposite - growth. The prototype of Scrooge McDuck lost about 900 million dollars on this, which, however, was blocked by a profit of his company of 2 billion dollars. But there is an unconvincing one, but nevertheless - an excuse: in the same 2005, they “flew”, putting Bill Gates and Soros on the same thing.
Why did it happen so? Answering journalists this question, Buffett with his usual humor said that while in physics mechanical movements obey Newton’s laws, then in society human madness cannot be measured.
Against his will, he became a writer Warren Buffett. His books are in demand, he has the talent to write simply about the difficult, probably, the point is in intelligence and experience.
Oracle Testament
In the will after death for his family, he leaves a small percentage. Almost the entire state - 99% will go to the Warren Buffett Fund. The fund is managed by Allen Greenberg, a former son-in-law of a brilliant investor. If during the life of the father-in-law he contributes to this fund only a small percentage of his fortune - $ 10 million, then you can imagine what a solid company he will turn into overnight after his death. Another question: what will Berkshire Hathaway, led by the charisma of the Oracle from Omaha, turn into after this mournful event? However, for compatriots the Oracle from Omaha leaves an optimistic outlook, indicating that the stock market will grow in the future.