ABOUT WARREN
At age 20, Warren Edward Buffet had saved $9,800 (approximately $94,000 adjusted inflation for 2012 US Dollar). Buffet had saved nearly every dollar since he had made, and learned to be frugal at a young age. Following his graduation from Ivy League Columbia University, Warren took a class through Dale Carnegie training, and shortly after decided he would begin teaching a night class on Investment Principles at the University of Omaha-Nebrasaka.
Here is a short Clip from a Documentary of Buffet speaking about his transition from college and work ethic and social skills.
A NATURAL INVESTOR
IN 1956, Buffet was 26, and had saved a total of $174,000 ($1.47 Million 2012 USD) and Began his first investment firm, Buffet Partnerships Ltd. Buffet was a man of investment philosophy. At an early age he began selling Coca-Cola and Candy Bars around the neighborhood.
Buffets investment philosophies began developing early in his life. As a young man, Warren and a friend purchased a pinball machine for $25 put it in a babershop so it would be used by and paid for in change by people around the community. A few months after purchasing his first pinball machine, Warren and his friend had several other machines in local businesses, and capitalized on their small investments.
Below is a link to a graph showing what investments made in one of Buffet’s corporations Berkshire Hathaway, and the returns that would have resulted.
-Results of Investing $1000 in Berkshire Hathaway-
INVESTMENT PHILOSOPHY
Buffet’s Investment Philosophy tends to focus on and analyze the intrinsic values that a business holds, and would be known as a ‘value investor’. It is important to recognize the potential of a business and compare it to what the market says the current success of the business is, and HOW the potential of the business, can be translated into capital returns.
Buffet looks at aspects of different businesses that are currently undervalued and then focuses on how he can make money through ownership of that business, through the potential it holds.
Warren Focus’s on a List of 6 Key Criteria for potential investment ventures. A list is below, with a link to a more in depth article which focuses on Buffets Philosophies on investment and “value investing”.
1. Has the company consistently performed well?
2. Has the company avoided excess debt?
(The debt/equity ratio is calculated as follows: = Total Liabilities / Shareholders’ Equity)
3. Are profit margins high? Are they increasing?
4. How long has the company been public?
5. Do the company’s products rely on a commodity?
6. Is the stock selling at a 25% discount to its real value?
These are 6 key factors to the Buffet Philosophy and below is a link to a more in depth article of the research and criteria of Warrens thoughts.
Buffet Stands as one of the worlds wealthiest men alive. His current Net worth is $46 Billion even after donating billions of dollars to charity and pleding 99% of his wealth away in his will.
Below is a link to Berkshire Hathaway, Buffets company with a Net Income of $10.25 Billion. His investment skills have led to Berkshire shying from long term investments and turning to ownerships of companies as a whole. Berkshire owns a plethora of businesses including confectionery, retail, railroad, home furnishings, encyclopedias, manufacturers of vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; and also electric and gas utilities companies.
Buffets methodology of investment, trade deficit, and taxes open ears in congress, and he has influenced many high profilers on Wall-Street and congress both, for the US Government to disect his philosophies and ideas to stimulate the US Economy.
Value of the US dollar
Buffet predicts that in the future a majority of net ownership of the US by outsiders would be upwards of $11 Trillion dollars. These figures lead Buffet and others to believe the value of the US dollar is declining and that the widening trade deficit is creating a devalued US dollar, and US Assets.
Buffet is often looked to for financial/economic advice and has a strong loyalty to members of congress. His philosophies and actions set an example to US Economists and his predictions are often right. He is a genius when it comes to anazlying the potential of a business and how to focus on making money rather than only focus on increasing the value of market shares.
Innovator
Buffet also decides to invest in the future of America and help preserve our natural resources by investing $230 million in BYD Auto, a new energy automobile business. His 10% investment in BYD Auto returned for a 500% profit.
Buffet has taught others it is imperative to look to the future and recognize the potential for new energy sources and the effect these corporations will have on our economy.
BYD Advertisement
Buffet Is seen below discussing policy with President Obama as his viewpoint is highly respected after the long list of achievements he has made.
“According to a White House official, the two men met “to discuss the economy and our ongoing efforts to work with the private sector to stimulate growth and create jobs.”-CNBC
Here is the source of the picture above and interesting article about Buffets influence on Congress and US policy.
A LESSON LEARNED
It is important that we value the information and the story line, and habits of the 82 year old Billionaire, and try respect his frugalness despite having enough money to buy anything he desires. Buffet is constantly searching and working for a better tomorrow, not only for himself, but the betterment of mankind.
As related to US Economic History, Warrens efforts have taught us that it is important to use what we know already, to base our judgement on the future success of a business. We need to utilize the knowledge of potential that a business has and maximize that potential to returns for profit.
I think that Buffet has great philosophies on business and the current state of the US Economy and would even be a great help to stimulate the growth through his ideals.
Buffet has had great success that can translate to others, his eye for market potential is undeniable, but also a very valuable asset to any listeners that lend an ear to learning, even President Obama.
Buffet Stands as one of the worlds richest men, and I hope that viewers can come away with a different perspective of wealth and information, as well as the potential a business holds, not only its worth to Wall Street.
Works Cited:
pal8583. “Dale Carnegie – YouTube.”YouTube. N.p., n.d. Web. 3 Dec. 2012. <http://www.youtube.com/user/pal8583?v=k7gXaPY524I>.
link, clicking this. “BERKSHIRE HATHAWAY INC..” BERKSHIRE HATHAWAY INC.. N.p., n.d. Web. 3 Dec. 2012. <http://www.berkshirehathaway.com>
“U.S. economy will ‘inch’ ahead under Obama or Romney: Buffett – New York Daily News.” Featured Articles From The New York Daily News. N.p., n.d. Web. 3 Dec. 2012. <http://articles.nydailynews.com/2012-10-24/news/34713407_1_billionaire-investor-warren-buffett-bnsf-global-economy>.
“Money: Interactive Buffett Timeline – US News and World Report.” US News & World Report | News & Rankings | Best Colleges, Best Hospitals, and more. US NEWS, n.d. Web. 3 Dec. 2012. <http://www.usnews.com/usnews/biztech/
Kennon, Joshua. “Warren Buffett Biography.” Investing for Beginners. N.p., n.d. Web. 3 Dec. 2012. <http://beginnersinvest.about.com/cs/warrenbuffett/a/aawarrenbio.htm>.
Crippen, Alex . “Warren Buffett Gets New Tie from President Obama at White House Meeting.” Stock Market News, Business News, Financial, Earnings, World Markets – CNBC. N.p., n.d. Web. 3 Dec. 2012. <http://www.cnbc.com/id/38245375/Warren_Buffett_Gets_New_Tie_from_President_Obama_at_White_House_Meeting>.
” Warren Buffett: How He Does It.”Investopedia – Educating the world about finance. N.p., n.d. Web. 3 Dec. 2012. <http://www.investopedia.com/articles/01
Written By-Jacob Thomas
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