Warren Buffett example essay topic

Warren Buffett Berkshire Hathaway Inc. Warren Buffett has been called the world's greatest investor. That is a very accurate nickname. He certainly knows about investing, or he wouldn't be worth over $36 billion today (web). In fact, if you had invested $10,000 in Berkshire Hathaway when he took over in 1965, you would have about $22,000,000 today (web). Moreover, had you invested $10,000 with him from the beginning, in 1956, you would now be worth closer to $85 million (Lowe).

Warren Edward Buffett was born on August 30, 1930 in Omaha, Nebraska. He is the son of Howard and Leila Buffett. Howard, a long-time resident of Omaha, was a local stockbroker and member of the U.S. House of Representatives. As a boy, young Warren loved numbers and could easily keep track of mathematical calculations in his head. At eight, he began reading books on the stock market. And, at eleven, he bought his first shares of stock, Cities Service Preferred.

In junior high and high school he became quite a young businessman. He was living in the Washington, D.C. area at the time, while his father served four terms as a congressman. At thirteen, he worked two newspaper routes, retrieved lost golf balls, and handicapped racehorses. He saved the money he earned and bought reconditioned pinball machine for $25 each and put them in the local barbershops where he was soon making about $50 dollars per week (Train).

In high school, Buffett and a friend bought a 1934 Rolls Royce for $350 and rented it out for $35 per day. When he graduated high school at sixteen, Warren had already saved up over$6000 (which would worth $60,000, today), which helped to finance his college tuition. In his senior year at the University of Nebraska he read Benjamin Graham's book, The Intelligent Investor. This book impressed him so much that he went to study with Graham at the Columbia Business School in New York. He returned to Omaha after earning his masters degree in economics. Buffett worked for his father's firm for a short time, but soon moved to New York to work for his friend and mentor, Graham, at Graham-Newman.

However, after only two years the partnership dissolved. Graham, then sixty-one, had decided to retire. Warren returned to Omaha and opened his own limited investment partnership. He was only twenty-five years old. Over the next thirteen years, although the Dow Jones Industrial Average declined in price five times, Buffett's partnership never had a losing year. Buffett chose his investments "on the basis of value not popularity".

This is the strategy he learned from Professor Graham - buy shares in a company as long as they are lower than the company's intrinsic value. He bought not only minority positions, but also controlling interests in several public and private companies. In 1962 he began purchasing shares in an ailing textile manufacturer called Berkshire Hathaway (Hag strom). Buffett's reputation became more widely known and more investors came aboard. By 1965, the partnership's assets had grown to $26 million. In 1969 however, Warren found himself out of his element.

The stock market was booming, and even poor risks were selling way over their business value. Buffett decided to call it quits. So he distributed to each investor his capital plus profits and gave them three choices: They could go off on their own, or Buffett would buy them a spread of municipal bonds with their money, or he would refer them to other investment advisors (Train). This was a timely decision. Three years after the partnership dissolved, the stock market had its worst collapse in decades. During this slump, Buffett restarted his business, taking advantage of all of the extraordinary bargains that became available.

"I'm like a sex starved guy in a harem", he announced (Train). He continues to work / invest to this day. Over the years, Buffett has acquired newspapers, insurance companies, tobacco companies, aluminum and iron companies, food and beer enterprises, broadcasting firms, name brand firms such as Gillette and Coca-Cola, a furniture store, a jewelry store, and even the Pinkerton detective agency. He has consistently outperformed the market average of 10% at more than 24.7%. He is so successful and well trusted; one share in Berkshire Hathaway has grown from an original cost of $19 per share to a one time high of over $80,000 per share (web).

There are 1,342,000 shares and Buffett says that he will never allow them to split, therefore keeping the stock stable and keeping out the people that are in for the fast buck. Currently, the stock is trading at around $60,000 per share and seems to be holding fairly steadily over the last few weeks. Unfortunately for us, it may be too late to realize any large profits from a new investment in Berkshire Hathaway. Warren Buffett is 69 years old the number two man, Charles Munger, is 76 and there is worry that the company will not be able to continue at the same financial pace. Of course, in 1994 Buffett said, "I have publicly announced I plan to run Berkshire until 5 or 10 years after I die. But Berkshire is pretty easy to run" (Lowe).

Bibliography

Hagstrom, Robert G, . The Warren Buffett Way: Investment Strategies of the World's Greatest Investor. New York: John Wiley & Sons, Inc., 1994.
Lowe, Janet C., Warren Buffett Speaks: Wit and Wisdom From the World's Greatest Investor. New York: John Wiley & Sons, Inc., 1997.
Train, John. The Midas Touch. New York: Harper & Row Publishers, Inc., 1987.
The World's Richest People. ' web 08 Nov. 1999.
Forbes Inc. 08 Nov. 1999.
web. ' Warren Buffett. ' web 08 Nov. 1999.
Investor Guide. com Inc. Berkshire Hathaway Inc. 08 Nov. 1999.