Warren Buffett
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Warren Edward Buffett (born August 30, 1930) is a wealthy American investor and businessman.
Nicknamed the "Oracle of Omaha", Buffett has amassed an enormous fortune from astute investments through his company Berkshire Hathaway, of which he holds 38%. With an estimated net worth of $44 billion as of 2005, he is ranked by Forbes as the second-richest person in the world, behind Bill Gates.
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Biography
Buffett was born in Omaha, Nebraska. His father Howard Buffett was a stockbroker and member of Congress. Buffett was educated at the University of Nebraska (transferring there from the Wharton School of Finance and Commerce at the University of Pennsylvania) and took a Master's degree in economics at Columbia Business School, studying under Benjamin Graham. He went on to work for Graham at Graham-Newman where he followed Graham's value investing rules. Buffett returned to Omaha in 1957 and started his own investment partnership, putting in his own money and raising additional investments from friends and family. By 1969, he had returned an average of almost 30% a year, in a market where 7% to 11% is the norm and anything more is outstanding. Under Buffett's direction, Berkshire has outperformed market benchmarks such as the S&P 500 and the Dow Jones Industrial Average for over forty years.
He married Susan Thompson in 1952. They separated in 1977 but remained married. She was a significant stockholder in Berkshire Hathaway and a board member. Mrs. Buffett died on July 29, 2004 from a stroke. Bono sang at her funeral in Omaha on Monday; they had worked together on AIDS issues. [1] (http://www.usatoday.com/money/companies/2004-07-29-susan-buffett-obit_x.htm) [2] (http://www.aegis.com/news/ap/2004/AP040810.html) Buffett lives with Astrid Menks; his late wife largely resided in San Francisco in recent years. He has three children. Warren Buffett has not yet named any clear successors to run Berkshire Hathaway. He has disclosed that a letter to Berkshire's board of directors exists—only to be opened after his death. It likely suggests his role as CEO be split in two—with one executive handling the operations of the company and the other executive in charge of its various investments.
Mr. Buffett has stated that the majority of his fortune will pass to his Buffett Foundation.
Investments
Among the companies he invested in during his tenure as managing partner of the Buffett Partnership was Berkshire Hathaway, a New Bedford textile company. Buffett eventually liquidated the textile business but kept the name and turned the shell of the company into a investment business, notably in the insurance field, which generated a steady cash flow for further investment. As of 2005, Berkshire Hathaway owns over 40 companies that employ over 150,000 people.
Buffett customarily focuses his investments in undervalued companies with good long-term growth potential. Identifying such companies is the difficult part. The actual value generated is more by the companies he owns than stock market investments, although his stock ownership in companies such as Coca-Cola, of which Berkshire Hathaway is the largest single shareholder, and Gillette, attracts more attention. Buffett famously avoids high tech companies, not because they are inherently less desirable, but because he prefers businesses he understands.
Buffett, through Berkshire Hathaway, also owns insurance companies like Geico and General Re that generate substantial float deriving from their insurance premiums. These companies are a source of funds that he then allocates to Berkshire Hathaway's subsidiaries and uses to acquire new companies.
Buffett is still living in the same house in suburban Omaha that he paid $31,500 (Lowenstein, "Buffett", 63) for in the 1950s.
In addition to being a major investor in Coca-Cola, he is also a fan of their products. In his 1991 letter to shareholders (http://www.berkshirehathaway.com/letters/1991.html), Buffett says that he drinks five cans of Cherry Coke a day.
Views on investing and economics
In terms of his personal life he is famously frugal. He is only paid $100,000 a year by Berkshire Hathaway by his own choice, with the bulk of his disposable income coming from his other personal investments outside of Berkshire, even though these apparently constitute less than 1% of his overall net worth (Berkshire has not paid cash dividends for decades). He makes charitable donations through the Buffett Foundation, usually around $12 million a year in total. He has stated his intention to disburse 99% of his wealth after his death to good causes.
Buffett believes that much of the problem with the economies of the United States and other industrialized countries in recent years results from the proliferation of persons and organizations who produce nothing directly but are compensated based on the volume of business which they transact. He feels that most stock trades are recommended and made primarily to benefit the brokers rather than the investors and has stated that he feels that the world would benefit if each person had a lifetime maximum of twenty stock trades. He steadfastly refuses to split Berkshire Hathaway stock because the purpose of this would be to facilitate trading, which he has no desire to do.
He states that he sees his fellow Berkshire Hathaway investors as partners and hopes that they take their investment likewise, as a long-term or lifelong investment; he discourages those with a short-term view from investing in Berkshire Hathaway. He prefers Berkshire Hathaway shareholders actually to take physical possession of their share certificates rather than allowing their shares to be held by a brokerage firm in "street name" and before 2003 made a contribution for each "A" share held directly by a shareholder to a recognized charity of their choice; the contributions on behalf of those otherwise entitled to direct them but whose shares are held in brokerage accounts were forfeited. In 2003 Berkshire Hathaway terminated the program due to boycotts on subsidiary companies related to donations made to abortion-related recipients [3] (http://berkshirehathaway.com/2003ar/2003ar.pdf), apparently including donations directed by Buffett himself with his own shares; Buffett has long been known for being pro-choice on abortion and generally favorable to views associated with the Democratic Party. Indeed, he has been highly critical of the tax policy of the George W. Bush Administration and was announced as an economic advisor to former presidential candidate John Kerry. Buffett contends that the Bush tax policy unfairly burdens the middle class. However, he is also a confidante of California governor Arnold Schwarzenegger, a Republican.
Berkshire Hathaway leadership and the issue of succession
His main business associate is Charlie Munger, once a lawyer with Munger, Tolles & Olson and now CEO of Berkshire Hathaway subsidiary Wesco Financial Corporation and vice-chairman of Berkshire Hathaway. It is believed he will succeed Buffett along with Geico's CEO Lou Simpson; this may prove problematic, as Munger is six years Buffett's senior.
Buffett often comments on this issue in the Berkshire Hathaway annual report.
External links
- Berkshire Hathaway Official Website (http://www.berkshirehathaway.com) - Source for annual reports, which usually includes commentary from Warren Buffett.
- Record of Warren Buffett Stock Buys and Sells (http://www.gurufocus.com/StockBuy.php?action=buy&GuruName=Warren%20Buffett) - Source for Warren Buffett Stock Picks
- Warren Buffett's Wild Ride at Salomon - October 27, 1997 (http://download.wharton.upenn.edu/download/pub/lgst/Zicklinl/Salomon%20Case%20-%20Buffett%20Point%20of%20view.doc)
Bio
- Forbes 400 listing (http://www.forbes.com/finance/lists/54/2003/LIR.jhtml?passListId=54&passYear=2003&passListType=Person&uniqueId=C0R3&datatype=Person)
- BBC profile for Buffett (http://news.bbc.co.uk/1/hi/business/3150257.stm)
Books
- Books on Warren Buffett (http://www.investitor.net/buffett/books-warren-buffett-1.htm)
Interview
- Warren Buffett Interview (http://chinese-school.netfirms.com/Warren-Buffett-interview.html) - "Warren Buffett on the Stock Market" with Carol Loomis of Fortune Magazine on December 6, 2001.de:Warren Buffett
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