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Encyclopedia > Warren Buffet

Warren Edward Buffett (born August 30, 1930) is a wealthy American investor and businessman.


Nicknamed the "Oracle of Omaha", Buffett has amassed a substantial fortune from astute investments through his company Berkshire Hathaway, of which he holds 38%. With an estimated net worth of $42.9 billion as of 2004, he is ranked by Forbes as the second-richest person in the world, behind Bill Gates.

Contents

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 masters in economics at Columbia University, 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 Thursday, July 29, 2004 from a stroke. 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 his enterprise.


Investments

One of his earliest investments was in American Express. Among the companies he invested in 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 2003, Berkshire Hathaway owns around forty companies that employ 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 free cash flow relative to the company's price. 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 Nebraska that he paid $57,000 for in the 1940/1950's. He drives an 1985 Lincoln Contiental. Also He is a huge fan of The Coca Cola Company and he drinks about 15 cans of Coke each 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 [1] (http://berkshirehathaway.com/2003ar/2003ar.pdf), apparently including donations directed by Buffett himself with his own shares (disputed ); 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 canidate 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

Wikiquote has a collection of quotations related to:
  • Berkshire Hathaway Official Website (http://www.berkshirehathaway.com) - Source for annual reports, which usually includes commentary from Warren Buffett.
  • Vinvesting.com Warren Buffett Page (http://www.vinvesting.com/buffett/) - Source for Warren Buffett news and articles.
  • Warren Buffett Stock Picks and Commentaries at GuruFocus.com  (http://www.gurufocus.com/ListGuru.php?GuruName=Warren%20Buffett) - Stock Picks and Commentaries of Warren Buffett

Articles

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.

Video


  Results from FactBites:
 
Warren Buffett - Wikipedia, the free encyclopedia (3779 words)
Warren Edward Buffett (born August 30, 1930) is an American investor, businessman and philanthropist.
Warren and Susan Buffett had their second child, Howard Graham Buffett.
Buffet's net worth reached $620 million, placing him on the Forbes 400 for the first time.
  More results at FactBites »

 
 

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