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Warren Buffet : Investor of the century?

After having bought Berkshire Hataway in 1962, a struggling textile manufacturing company, 40 years later Warren Buffet became one of the richest men in the world.

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Born 30 August 1930 in Omaha, Nebraska, Warren Buffet is an american investor who regularly appears in second place in the list of biggest professional fortunes, succeeded only by Bill Gates, founder of Microsoft. Nicknamed the Oracle of Omaha, he has accumulated an enormous fortune thanks to his investments in Berkshire Hataway of which he owns more than 38% of its capital.

Buffet began his studies at the University of Wharton and was then transferred to Nebraska University. Here he became interested in financial investments and discovered “The Intelligent Investor”, a book written by one of his future professors, Benjamin Graham. Buffet pursued his studies and in 1951, earned a Masters degree in Economy at the University of Columbia where Benjamin Graham was one of his professors. After having been received the only A+ ever awarded in one of Graham?s courses, Warren buffet worked in Graham?s company and from 1956 worked as a broker in his father?s company based in Nebraska.

He created his first investment company in 1956 by investing 100 dollars from his own pocket and 105 000 dollars collected from friends and family. He went on to create other investment companies all under umbrella of Buffet Partnership Limited. Between 1956 and 1969, his profit was approximately 30% per year while the market earned 7 to 11 %.

In 1962, he invested in Berkshire Hataway, a regional textile manufacturing firm which was sold at a low price and then broke away from his former investments in order to concentrate on Berkshire Hataway into which he consolidated all his investments. He used spare money from the textile business to invest in quoted company shares.

Berkshire Hataway became one of the biggest holding companies in the world and Buffet kept its initial name as a reminder that repurchasing a company does not depend solely on its financial value.

Thanks to Berkshire Hataway, Warren Buffet is present in insurance, reinsurance, electricity generation and distribution, painting, confectionary, jewelry and ice cream. He also own significant shares in firms such as Amex, Coco-cola and Procter. His company?s current capitalization is around 136 billion dollars.

An investor having bought a share of 19 dollars in Berkshire Hataway in 1965, owned a title worth 59 377 dollars in the beginning of 2006.

The principles guiding Warren Buffet?s choices are very simple:

- He invested in companies whose profits where higher than 75 million dollars before tax
- The companies? activities are simple to understand
- The managers have proven themselves and stayed in place

In June 2006, Warren Buffet announced that he was going to transfer about 10 million class B shares from Berkshire Hataway to the “Bill & Melinda Gates” Foundation (their shares being worth approximately 30 billion dollars). The foundation would receive 5% of the donation in current value each year from July 2006.

Warren Buffet declared on several occasions that he did not agree with the transfer of great fortunes from one generation to the next and that his children would inherit enough money “so that they would feel that they could do anything, but not so much that they would feel like doing nothing.” When asked about his philosophy in his fortune, Warren Buffet had the following to say a few years ago:

“If you stick me down in the middle of Bangladesh or Peru or someplace, you find out how much this talent is going to produce in the wrong kind of soil... I work in a market system that happens to reward what I do very well - disproportionately well. Mike Tyson, too. If you can knock a guy out in 10 seconds and earn $10 million for it, this world will pay a lot for that. If you’re a marvelous teacher, this world won’t pay a lot for it. If you are a terrific nurse, this world will not pay a lot for it."

Paul Monthe , April 2008

Article also available in : English EN | français FR

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