Warren E. Buffett’s approach to investments is deceptively easy.
“Forget what you know about buying honest companies at great prices; instead buy great companies at fair prices,” he once wrote to shareholders of Berkshire Hathaway, his business conglomerate.
This method – known as value -investing – existed long before Mr Buffett, now 94, started his career. But nobody did it – or as long – as he did. And he influenced generations of financiers, including Wall Street Hedgefonds Moguls, and he promoted the now common advice about investing for the long term.
In the 60 years that Mr Buffett Berkshire Hathaway has checked, he used value investments to turn from a failing textile manufacturer into a conglomerate of $ 1.1 trillion, takeover of companies and microcosm from the US economy. One of the largest railways in America? Owned by Berkshire. The largest shareholder in American Express and Coca-Cola? Berkshire too.
Mr Buffett has invented a Midas-like personal fortune, with a value of around $ 168 billion, and was on the way the Avuncular Avatar of Capitalism in American style that was called for help by both managers and government officials in the 2008 financial crisis.
Mr. Buffett earned millions of admirers around the world that unparalleled success. Tens of thousands of them were present on Saturday at Berkshire’s annual meeting in Omaha when he stated that he was finally planning Get off as Chief Executive.
His announcement was greeted with surprise and then minutes of thunderous applause from shareholders – many of whom became millionaires by having Berkshire shares and to hold on to any financial aporism.
“I tell people everything I know about investing I have learned from Warren Buffett,” said Bill Ackman, the billionaire Hedgefonds manager who was in the crowd, in an interview after Mr Buffett’s announcement.
Mr Buffett has acknowledged that his huge fortune is not due to pure happiness. As he said it He won “De Eierstokloterij” By being born in the United States, when stock markets were prepared for one of the greatest economic booms in modern history.
He learned about share choices from a pioneer of value, Benjamin Graham, who was his professor at Columbia University. With crucial advice from Charles T. Munger, a colleague Nebraskan who became his old business partner, Mr Buffett Berkshire, which he bought control of in 1965, became the best possible argument for the discipline.
But few lived and breathed the discipline as he did, reading company balance for research – and pleasure – from sunrise to dusk.
Mr. Buffett then put that knowledge to work in various ways. Berkshire bought a wide range of successful companies, including See’s Candy, Fruit of the Loom and the Private Jet Service Netjets. But the most transforming were the acquisitions of insurers such as national compensation and Geico, who were on premiums that customers paid but had not yet claimed.
That money, known as the ‘float’, became the first financial engine of the Mr. Buffett’s Deal Machine. He used that money, together with profit from the other companies of the company, to buy what is now a collection of 189 companies. One of the largest is the BNSF -Spoorweg, Acquired in 2010 For around $ 26 billion; and the electricity producer Berkshire Hathaway Energy, Bought in 2000 For $ 2 billion that was subsequently expanded through his own acquisitions.
From March 31, that money stack, which Mr Buffett has called his ‘elephant gun’, was almost $ 348 billion.
Those opposite Mr. Buffett sat during the negotiation of tables over the years have said that he is friendly and courteous – but unyielding when it comes to the figures. When he is involved, rounds of negotiations about the price are not in the cards; He is ready to walk away.
“Warren is the most disciplined investor and the clearest thinker I have ever known,” said Byron Trott of the Merchant Bank BDT & MSD, who as Goldman Sachs dealer became one of the few bankers who said Mr Buffett that he trusted. “His ability to distil complexity in clarity and to manage with humility and conviction is unparalleled.”
Mr Buffett also used Berkshire’s money to buy a range of shares, with a portfolio with American Express, Bank of America, Coke, Chevron and – in one of his most profitable investments – Apple. For those companies, the ownership of Berkshire is usually the equivalent of a good household inspection seal.
And with the enormous balance of Berkshire and the unparalleled control of Mr Buffett, the conglomerate was able to penetrate and buy when others have to sell.
Mr Buffett is “an extraordinary investor in American Express and a personal friend for me,” said Stephen Squeri, the Chief Executive of American Express, after the announcement of Berkshire.
Another key to his success was to hold investments for years – “our favorite holding period is forever,” he said – lets returning back together, a process he has compared to a snowball that rolls downhill. ((A biography Where Mr. BUFFETT MEE collaborated, but criticized lateris named after the phenomenon.)
The other advantage of Berkshire for his investors is that it does not charge any costs, in contrast to investment funds or hedge funds. In fact, Mr Buffett has criticized the size of the reimbursements imposed by Wall Street vehicles.
That said, Mr Buffett admitted that he has made many mistakes over the years. One was pass opportunities To invest early in technology giants such as Amazon and Microsoft, whose companies he said he did not understand at the time.
Despite different periods of underperformance, especially in recent years, Mr Buffett’s track record is amazing. According to his calculationsBerkshire won 5,502,284 percent from 1964 to 2024, compared to the S&P 500s 39,054 percent in the same period. His average annual profit was 19.9 percent, while the S&Ps were 10.4 percent.
Mr Buffett’s approach has inspired countless other financiers, including Mr Ackman and the Mogul Mario Gabelli investment fund. (Others have tried to copy it more directly, including Sardar Biglarariwhose own financial vehicle, Biglarari Holdings, the initials of Berkshire shares, Website -Design and invest focus.)
Nevertheless, Mr Buffett transcended the business community and reached the real celebrity, based on a Folksy Nebraska -Persona that shuns the usual attributes of Plutocratic wealth. Fans make pilgrim trips to his old house in Omaha and favor his preferences for regular products such as Cherry Coke, Dairy Queen Blizzards and See’s Fudge. (In particular, they are associated with Berkshire.)
He also became known in the pop culture, Via Cameo -performances In television shows, including “All My Children” and “The Office.”
He spoke to what he saw when the failure of the business world and Wall Street, in particular, regularly distribute professional brokers and traders to turn the markets into a “gambling stable” that could lure average investors in financial downfall.
He took a more serious position against the excesses of Wall Street in 1991 when he was forced to save the investment bank after a trade scandal as a major shareholder of Salomon Brothers. It was a low moment in Mr.’s career. Buffett.
Called to testify about Salomon, Mr Buffett for congress delivered a steel message To the employees of the company: “Loss money for the company, and I will understand; loss a fragmentation of reputation for the company, and I will be ruthless.”
His fame also gave him a unique influence in Washington and added weight to his statements about political and tax issues. Mr Ackman said that policy makers also followed Mr Buffett’s comments and annual letters, and acted on his ideas such as the handling of stock options for managers as operating costs.
Although a Democrat that Hillary Clinton approved for President and whose name adorned a proposal from the Obama era for higher taxes on the rich, Mr Buffett advised presidents of both parties. That was most visible in 2008, when he was confused by managers and the George W. Bush administration to help melt the global financial system.
Mr Buffett eventually agreed to invest billions Goldman Sachs And General ElectricMoving Mr Ackman compared to JP Morgan’s efforts to save banks early in the 20th century. However, it is that he, however, charged both companies an then-astronomical interest rate of 10 percent and have said that they were willing to pay and to survive his imprimatur.
“Warren Buffett represents everything that is good about American capitalism and America itself,” said Jamie Dimon, the Chief Executive of JPMorgan Chase, after Saturday’s announcement.
While the future of Berkshire seems financially solid, with Mr Ackman, who calls the company ‘The Rock of Gibraltar’, Longtime Buffett followers say that it cannot retain its apparently mythical status without his chief architect.
Berkshire’s next Chief Executive, Gregory Abelis considered an excellent operator of companies and a smart deal maker, and Mr Buffett hired Todd Combs and Ted Weschler more than ten years ago as high -level investment managers.
To Lawrence Cunningham, a former professor of rights to George Washington University and a shareholder, Mr Buffett “Berkshire gave the best possible opportunity for the next chapter.”
But other investors are worried that the company will become a little less special and will not revolve around the share choices it has put on the map. Bill Slead, whose investment firm owns the shares of Berkshire and who attended the annual meeting of this year, said that the company has already become less ambitious and potentially transforming deals is being avoided.
“It’s the end of an era,” said Mr. Smead.
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