How did Warren Buffett become an investment legend? Warren Buffett started a partnership with seven limited partners in 1956 when he was 25, with only $105,000 in the fund. Over the next 13 years, Buffett generated a 29% return using his own brand of value investing as distinct from his mentor and teacher, Benjamin Graham. One of his most successful investments during the period was an investment in American Express. After the company's stock price tumbled in the early 1960s, Buffett pointed out that the stock was trading far below what the company generated in cash flows overall for the past few years. By 1965, the fund already at $26 million and was considered a great success.
However, the turning point that established Buffett's reputation was his dissolution of the partnership in 1969. Why? Because Buffett claimed he could not find any stocks to buy with his investment approach, namely, his value investing approach. During this period Buffett said: "On one point, I am clear. I will not abandon a previous approach whose logic I understand, although I might find it difficult to apply, even though it may mean foregoing large and apparently easy profits to embrace an approach which I don't fully understand, have not practiced successfully and which possibly could lead to substantial permanent loss of capital" The fact that a money manager would actually put his investment philosophy, his principles, his values, above short term profits, distinguished himself from all potential hopefuls. And the subsequent drop in stock prices in the years to follow only proved his logic to be sound. And this began the legend of Warren Buffett.
After the dissolution of his partnership, Buffett invested his share of the proceeds of about $25 million into Berkshire Hathaway, a textile company whose best days seemed to be in the past. He used Berkshire Hathaway as a vehicle to acquire companies (GEICO, See's candy, Blue Chip Stamps and Buffalo News) and to make investments in other companies (Am Ex, Washington Post, Coke, Disney).
Still doubt the powers of Warren Buffett? Well then consider this: An investment of $ 100 in Berkshire Hathaway in December 1988 would have outperformed the S&P 500 four-fold over the next thirteen years. As CEO of the company, Buffett ran his business very differently than other investment firms: No corporate jets, maintained simple offices in his hometown of Omaha, Nebraska. He also refused to split the stock as the price went higher and higher to the point that only a very few investors could afford to buy a lot of stock on the company.
On June 28, 2010, just one share of Berkshire Hathaway was trading at $121,200, making it by far the highest priced listed stock in the United States, possibly the world. His annual reports are very transparent and included his views on investing and the markets, in language that even the lay investor can understand.
Hoping to one day meet the Oracle of Omaha,
The 360 Investing Guys,
Kevin
However, the turning point that established Buffett's reputation was his dissolution of the partnership in 1969. Why? Because Buffett claimed he could not find any stocks to buy with his investment approach, namely, his value investing approach. During this period Buffett said: "On one point, I am clear. I will not abandon a previous approach whose logic I understand, although I might find it difficult to apply, even though it may mean foregoing large and apparently easy profits to embrace an approach which I don't fully understand, have not practiced successfully and which possibly could lead to substantial permanent loss of capital" The fact that a money manager would actually put his investment philosophy, his principles, his values, above short term profits, distinguished himself from all potential hopefuls. And the subsequent drop in stock prices in the years to follow only proved his logic to be sound. And this began the legend of Warren Buffett.
After the dissolution of his partnership, Buffett invested his share of the proceeds of about $25 million into Berkshire Hathaway, a textile company whose best days seemed to be in the past. He used Berkshire Hathaway as a vehicle to acquire companies (GEICO, See's candy, Blue Chip Stamps and Buffalo News) and to make investments in other companies (Am Ex, Washington Post, Coke, Disney).
Still doubt the powers of Warren Buffett? Well then consider this: An investment of $ 100 in Berkshire Hathaway in December 1988 would have outperformed the S&P 500 four-fold over the next thirteen years. As CEO of the company, Buffett ran his business very differently than other investment firms: No corporate jets, maintained simple offices in his hometown of Omaha, Nebraska. He also refused to split the stock as the price went higher and higher to the point that only a very few investors could afford to buy a lot of stock on the company.
On June 28, 2010, just one share of Berkshire Hathaway was trading at $121,200, making it by far the highest priced listed stock in the United States, possibly the world. His annual reports are very transparent and included his views on investing and the markets, in language that even the lay investor can understand.
Hoping to one day meet the Oracle of Omaha,
The 360 Investing Guys,
Kevin
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