Warren E. Buffett’s approach to investment is deceptively simple.
“Forget what you know about the purchase of fair companies at wonderful prices; instead, buy wonderful companies at fair prices,” he wrote to the shareholders of Berkshire Hathaway, his business conglomerate.
This method – known as the value investment – had existed long before Mr. Buffett, now aged 94, began his career. But nobody has done it as well – or as long – as it is. And in the process, he influenced the generations of financiers, including the hedge magnate of Wall Street, and promoted the now common advice on long -term investment.
During the 60th anniversary that Mr. Buffett checked Berkshire Hathaway, he used value investment to transform a defaulting textile manufacturer into a conglomerate of $ 1.1 Billion, a corporate holder and a microcosm of the American economy. One of the largest railways in America? Belonging to Berkshire. The largest shareholder of American Express and Coca-Cola? Berkshire too.
Mr. Buffett raised a personal Midas type fortune, worth around 168 billion dollars, and has become along the way the avatar avatar of American style capitalism which was called for the help of business leaders and government representatives in the 2008 financial crisis.
This unrivaled success has earned Mr. Buffett millions of admirers worldwide. Tens of thousands of them were on site at the Berkshire annual meeting in Omaha on Saturday when he said that he had finally planned to resign as managing director.
His announcement was welcomed with surprise and then minutes of the Applause of Tonnerre of shareholders-many of which have become millionaires by having actions of Berkshire and hang on to all his financial aphorism.
“I tell people everything I know about the investment I learned from Warren Buffett,” said Bill Ackman, the billionaire healing fund manager who was in the crowd, in an interview after Mr. Buffett’s announcement.
Mr. Buffett acknowledged that his huge fortune does not have to debt to pure luck. As he said, he won “the ovarian lottery” by being born in the United States, when the stock markets were ready to create one of the largest economic booms in modern history.
He learned to picking actions from a pioneer in value investment, Benjamin Graham, who was his professor at Columbia University. With crucial advice from Charles T. Munger, a compatriot of Nebraskan who has become his long -standing trading partner, Mr. Buffett transformed Berkshire, which he bought control in 1965, in the argument as best as possible for the discipline.
But few lived and breathed discipline as he did, by reading business assessments for research – and pleasure – from dawn to twilight.
Mr. Buffett then put this knowledge to work in several ways. Berkshire bought a wide range of prosperous companies, including see candies, the fruit of the loom and private jet service netjets. But the most transformers were the acquisitions of insurers as a national compensation and Geico, who sat on bonuses that customers have paid but had not yet claimed.
This money, known as the “float”, has become the first financial engine of Mr. Buffett’s transaction machine. He used this money, as well as the benefits of other company companies, to buy what is now a collection of 189 companies. Among the most important are the BNSF Railroad, acquired in 2010 for around $ 26 billion; And the producer of electricity Berkshire Hathaway Energy, bought in 2000 for $ 2 billion which was then extended via its own acquisitions.
As of March 31, this cash battery, which Mr. Buffett called his “elephant pistol”, was nearly $ 348 billion.
Those who sat in front of Mr. Buffett to negotiate tables over the years have said that he was sympathetic and courteous – but inflexible with regard to figures. When involved, the price of the price of the price are not in the cards; He is ready to move away.
“Warren is the most disciplined investor and the thinner thinker I have ever known,” said Byron Trott from the BDT & MSD merchant bank, who, as a holder of Goldman Sachs, has become one of the few bankers that Mr. Buffett said he had confidence. “Its ability to distill the complexity in clarity and to direct with humility and conviction is unequaled.”
Mr. Buffett also used Berkshire’s cash to buy a range of shares, with a portfolio that includes American Express, Bank of America, Coke, Chevron and – in one of his most profitable investments – Apple. For these companies, the property of Berkshire tended to be the equivalent of a good seal of housekeeping approval.
And with the huge Berkshire assessment and the unrivaled control of Mr. Buffett, the conglomerate was able to dive at timely times, buying when the others have to sell.
Mr. Buffett was “an extraordinary investor in American Express and a personal friend for me,” said Stephen Sceri, the general manager of American Express, after the announcement of Berkshire.
Another key to its success has been to keep investments for ages – “our favorite period of detention is eternally,” he said – leaving aggravated feedback over and over, a process he compared to a snowball that rolls downhill. (A biography with which Mr. Buffett cooperated, but criticized later, bears the name of the phenomenon.)
The other advantage of Berkshire for his investors is that he does not charge any fees, unlike the common funds or the hedge funds. In fact, Mr. Buffett criticized the size of the costs billed by Wall Street vehicles.
That said, Mr. Buffett admitted that he had made many mistakes over the years. One was to transmit opportunities to invest early in technology giants like Amazon and Microsoft, which he said at the time.
However, despite several periods of underperformance, especially in recent years, the history of Mr. Buffett are narcotic. According to his calculations, Berkshire won 5,502,284% from 1964 to 2024, against 39,054% of the S&P 500 during the same period. Its average annual gain was 19.9%, while S&P was 10.4%.
Mr. Buffett’s approach has inspired countless other financiers, including Mr. Ackman and the magnate of the Mario Gabelli Placement Fund. (Others have sought to copy it more directly, notably Sardar Biglari, whose own financial vehicle, Biglari Holdings, share the initials of Berkshire, the design of the website and the investment.)
However, Mr. Buffett transcended the renown of the business and reached a real celebrity, based on a folk character from Nebraska who avoided the usual external signs of ratherocratic wealth. Fans make pilgrimages in his longtime house in Omaha and cite his preferences for traditional products like Cherry Coke, Dairy Queen Blizzards and See’s Fudge. (All, in particular, are associated with Berkshire.)
It has also become known in pop culture, through appearances in television shows, notably “All My Children” and “The Office”.
He had fun that he considered the failure of the business world and Wall Street, in particular, regularly making fun of professional brokers and merchants to transform the markets into a “play salon” which could attract average ruined investors.
He took a more serious position against the excesses of Wall Street in 1991 while as a major actionary of Salomon Brothers, he was forced to replenish the investment bank after a commercial scandal. It was a low moment in Mr. Buffett’s career.
Called to testify before the Congress on Solomon, Mr. Buffett sent a steel message to the company’s employees: “Losing money for the company, and I will understand; Losing a lesser reputation for the company, and I will be ruthless. ”
His fame also gave him a unique influence to Washington, adding weight to his statements on political and tax issues. Ackman said that political decision -makers have also closely followed Mr. Buffett’s comments and annual letters and acted on his ideas such as the processing of action purchase options for executives as a business expenditure.
Although a Democrat who approved Hillary Clinton to the presidency and whose name has honored a proposal from the Obama era for higher taxes on the rich, Mr. Buffett advised the presidents of the two parties. It was the most visible in 2008, when he was begged by business leaders and the George W. Bush administration to help the global financial system.
Mr. Buffett finally agreed to invest billions of billions in Goldman Sachs and General Electric, which means that Mr. Ackman compared to JP Morgan’s efforts to save banks at the beginning of the 20th century. True to his form, however, he billed the two companies an interest rate of 10% at the time – a burden of leaders said they were ready to pay to win his printer and survive.
“Warren Buffett represents everything that is good in American capitalism and America itself,” said Jamie Dimon, Managing Director of Jpmorgan Chase, after Saturday’s announcement.
While the future of Berkshire seems financially solid, Mr. Ackman calling the company “The Rocher de Gibraltar”, the long -standing followers of Buffett say that he may not keep his apparently legendary status without his chief architect.
The next CEO of Berkshire, Gregory Abel, is considered an excellent business operator and an informed trades manufacturer, and Mr. Buffett hired Todd Combtes and Ted Weschler as high -level investment managers more than a decade.
In Lawrence Cunningham, director of the Weinberg Center for Corporate Governance of the University of Delaware and shareholder, Mr. Buffett “gave Berkshire the best chance for the next chapter”.
But other investors fear that the company will become a little less special and will not revolve around the picking of the actions which puts it on the map. Bill Smead, whose investment company owns the actions of Berkshire and who attended the annual meeting of this year, said that the conglomerate had already become less ambitious, avoiding potentially transformative agreements.
“This is the end of an era,” said Smead.
