Warren Buffett is a businessman, philanthropist and one of the most successful and widely respected investors globally. His net worth was estimated at $71.8 billion as of July 2020. Buffet's investment philosophy is widely followed around the globe.
Early years and education
Born in Omaha, US, in 1930, Buffet developed an interest in the business world and started investing at an early age, including in the stock market. His father, Howard, was a stockbroker with his own brokerage firm, and his mother Leila was a housewife. Buffett had two sisters, one older than him and one younger. At eleven years old, he purchased three shares of Cities Service Preferred at $38 per share for both himself and his older sister. But, the stock fell to just over $27 a share. A resilient Warren held his shares until they rebounded to $40.
Buffet started his education at the Wharton School at the University of Pennsylvania before moving back to go to the University of Nebraska, where he received an undergraduate degree in business administration. After graduation, Buffett wanted to go to Harvard Business School, but got rejected for being "too young". Instead, he went to the Columbia Business School, where he earned his graduation in economics.
Ben Graham, an investor who was teaching at Columbia had a great influence on Buffett. Buffett learnt about the fundamentals of investing in Graham’s classes. Through his simple yet profound investment principles, Graham became an idyllic figure to the twenty-one-year-old Warren Buffett.
In the initial days of his career, Buffet worked at his father's brokerage firm. His career as an investment salesperson in the early 1950s was not successful. In 1956, he formed the Buffet Partnership. Seven family members and friends invested $105,000 in total, with Buffett investing only $100 himself. By the end of the year, he was managing around $300,000.
Warren Buffett started buying stocks in Berkshire Hathaway in 1962, when it was mainly run as a textiles company. He realised there was not so much profit in it and started to phase it out. He started investing in insurance companies instead. Less than 10 years later, in 1965, he was in control of Berkshire Hathaway. In 1970, Buffett named himself as the company’s chairman and wrote his first letter to the shareholders. These letters from Buffett would later become very famous and a subject of study for many investors around the world. Berkshire later acquired several companies, including See’s Candy and GEICO. Berkshire managed to own a 7 per cent share in Coca-Cola, which was worth over $1 billion. Buffett became a billionaire in 1990. In the early to late 2000s, Buffet invested heavily in big banks.
Since the year 2000, Buffett has donated more than $46 billion, becoming the most charitable billionaire. In June 2006, Buffett announced his plans to donate his entire fortune to charity. Then, in 2010, Buffett and Bill Gates launched ‘The Giving Pledge campaign’ to encourage other wealthy individuals to pursue philanthropy.
Buffet's investment philosophy revolves around how a company works. He looks for securities whose prices are unjustifiably low based on their intrinsic worth. Rather than focus supply and demand intricacies of the stock market, Buffett is known to look at companies as a whole. Some of the factors Buffett is believed to consider are company performance, company debt, and profit margins. Other considerations for value investors like Buffett include whether companies are public, how reliant they are on commodities, and how cheap they are. Buffet's vision to avoid the hype, and stick around companies with his long-term approach gives him his edge.