Warren E. Buffett’s approach to investment is misleading.
“Forget what you know about buying fair businesses at great prices, instead, buy great businesses at fair prices,” he once wrote to the shareholders of Berkshire Hathaway, his business group.
This method – known as the value of value – existed long before Mr Buffett, now 94, began his career. But no one also did it – or for as long as – as he did. And in the process, it influenced generations of financiers, including Moguls Hedge Hedge Hedge, and promoted the usual advice on investment in the long run.
During the 60 years that Mr Buffett has checked Berkshire Hathaway, he used Value Investing to convert a failed textile manufacturer into $ 1.1 trillion, the acquisition corporate machine and the microcosm of the US economy. One of America’s biggest railways? Belonging to Berkshire. The largest shareholder of American Express and Coca-Cola? Berkshire, too.
Mr Buffett gathered a personal fortune -like luck, worth about $ 168 billion, and along the road became the Avuncular Avatar of the American style of capitalism, called for help by both corporate executives and government officials in the 2008 financial crisis.
This unparalleled success has won Mr Buffett millions of fans around the world. Tens of thousands of them were on alert at Berkshire’s annual meeting in Omaha on Saturday, when he said he was finally planning to resign as CEO.
Its announcement was surprised and then practically applauded by shareholders – many of whom became a millionaire owned by Berkshire’s stock and hanged in every economic dedication.
“I tell people all that I know about the investment I learned from Warren Buffett,” Bill Ackman, billionaire mutual fund manager in the crowd, said in an interview after Mr Buffett’s announcement.
Mr Buffett acknowledged that his enormous fortune owes no small debt to net luck. As he put it, he won “The Ovarian Lottery”, he was born in the United States when stock markets were prepared to create one of the largest financial booms in modern history.
He learned about receiving shares from a pioneer of the value of the value of value, Benjamin Graham, who was his professor at Columbia University. With critical tips by Charles T. Munger, a colleague Nebraskan, who became his long -term partner, Mr Buffett returned Berkshire, who bought control of 1965, to the best possible argument for discipline.
But few lived and strangled discipline as he did, reading corporate balance sheets for research – and fun – from dawn to dusk.
Mr Buffett then put this knowledge to work in various ways. Berkshire bought a huge series of successful businesses, including Candy See, Fruit of the Loom and private jet service netjets. But the most transformatives were the acquisitions of insurers such as national compensation and Geico, who sat in premiums paid by customers but had not yet claimed.
These cash, known as “Float”, became Mr Buffett’s first financial machine. He used this money, along with the profits from the company’s other companies to buy what is now a collection of 189 companies. Among the biggest is the BNSF rail, acquired in 2010 for about $ 26 billion. and electricity producer Berkshire Hathaway Energy, purchased in 2000 for $ 2 billion that was subsequently expanded through its own acquisitions.
Since March 31, this pile of cash, which Mr Buffett called his “Gun Elephant”, was nearly $ 348 billion.
Those who have sat opposite Mr Buffett in the negotiation of tables over the years have said that they are friendly and kind – but rigid when it comes to numbers. When involved, the rounds of the puzzle above the price are not on the cards. He’s ready to leave.
“Warren is the most disciplined investor and the clearest thinker I’ve ever met,” said Byron Trott of Merchant Bank Bdt & MSD, who as a deal manufacturer of Goldman Sachs became one of the few bankers that Mr Buffett said he was trusting. “His ability to distill the complexity to clarity and lead with humility and belief is unparalleled.”
Mr Buffett also used Berkshire cash to buy a series of stocks, with a portfolio including American Express, Bank of America, Coke, Chevron and – in one of his most profitable investments – Apple. For these companies, Berkshire’s ownership tends to be the equivalent of a good home stamp.
And with Berkshire’s huge balance sheet and Mr Buffett’s unparalleled control, the group was able to enter the right time, buying when others have to sell.
Mr Buffett was “an excellent investor in American Express and a personal friend for me,” said Stephen Squeri, chief executive of American Express, following Berkshire’s announcement.
Another key to his success was to maintain investment for centuries – “Our favorite exploitation period is forever,” he said – letting the Union come back again and again, a process compared to a downward avalanche. (A biography with which Mr. Buffett collaborated, but later criticized, named after the phenomenon.)
The other advantage of Berkshire for its investors is that it does not charge fees, as opposed to mutual funds or risk funds. In fact, Mr Buffett has criticized the size of the fees charged by Wall Street vehicles.
Taking this, Mr Buffett admitted that he made many mistakes over the years. Someone was going on opportunities to invest early in technological giants such as Amazon and Microsoft, whose businesses said he did not understand then.
Still, despite the various low -performance periods, especially in recent years, Mr Buffett’s history is amazing. According to his calculations, Berkshire won 5,502,284 % from 1964 to 2024, compared to 39,054 % of the S&P 500 during the same period. Its average annual profit was 19.9 %, while S&P was 10.4 %.
Mr Buffett’s approach has inspired countless other financiers, including Mr Ackman and Mogul of mutual capital Mario Gabelli. (Others tried to copy it more directly, including Sardar Biglari, whose own financial vehicle, Biglari Holdings, shares Berkshire’s initials, website design and catering.)
However, Mr Buffett overcame the reputation of businesses and achieved real celebrity, drawing on a Nebraska popular face that avoids the usual traps of plutocratic wealth. Fans make pilgrimages to his long -term home in Omaha and favored his preferences for mainstream products such as Cherry Coke, dairy queen Blizzards and See’s Fudge. (All, mostly, are associated with Berkshire.)
He also became known in pop culture, through television shows, such as “All My Kids” and “The Office”.
He was entertained in what he saw as the failure of the business world and Wall Street, in particular, the regular violation of professional brokers and traders to convert markets into a “gambling living room” that could entice average investors into financial disaster.
He took a more serious attitude against the exaggerations of Wall Street in 1991, when as an important shareholder of Salomon Brothers, he was forced to rescue the investment bank after a trading scandal. It was a low moment in Mr Buffett’s career.
He was called upon to deposit before Congress for Salomon, Mr Buffett gave a message with business employees: “You lose money for the business and I will understand, I lose a piece of reputation for the business and I will be ruthless.”
His reputation also gave him a unique domination of Washington, adding a burden to his statements on political and budgetary issues. Mr Ackman said that politics officials also carefully followed Mr Buffett’s comments and annual letters and acted on his ideas, such as dealing with shares for executives as corporate expenses.
Although a Democrat who approved Hillary Clinton for the president and whose name adorned a proposal for Obama era for higher taxes for the rich, Mr Buffett informed the presidents from both parties. This was the most visible in 2008 when it was beseeechechechechechechechechechechechechegechechechechechechechechechechechechegechechechechechechechechechechechegechechechechechechechechechechechegechechechechechechechechechechechege Hechechechechechechechechechechechechechegechechechechechechechechechechechechegechechechechechechechechechechechegechechechechechechechechechechechegechechechechechechechechechechegechechechechechechechechechechege And the administration of George W. Bush to help the global financial system melt.
Mr Buffett finally agreed to invest billions in Goldman Sachs and General Electric, moving that Mr Ackman compared to JP Morgan’s efforts to save banks in the early 20th century. True, however, charged both companies to a 10 %-to -stomical at that time-a cargo executives said they were willing to pay to win Imprimatur and survive.
“Warren Buffett represents everything that is good for American capitalism and America itself,” said Jamorgan Chase’s chief executive, after the Saturday announcement.
While Berkshire’s future seems financially stable, with Mr Ackman calling “The Rock of Gibraltar”, Buffett’s long -term followers say he cannot maintain his seemingly mythical regime without his main architect.
Berkshire’s next chief executive, Gregory Abel, is considered an excellent business operator and one understanding manufacturer of agreements and Mr Buffett hired Todd Combs and Ted Weschler as high -level investment executives more than a decade ago.
For Lawrence Cunningham, director of the Weinberg Corporate Governance Center at the University of Delaware and a shareholder, Mr Buffett “gave Berkshire the best opportunity for the next chapter”.
But other investors are worried that the company will become a little less separate and will not rotate around the choice of stocks that put it on the map. Bill Smead, whose investment company holds the Berkshire stock and attended this year’s annual meeting, said the group has already become less ambitious, avoiding potentially transformative agreements.
“It’s the end of an era,” Mr Smead said.
