What Makes Warren Buffet A Master Investor?
I’m sure many of you have heard of the Master Investor Warren Buffett. The world’s third-wealthiest person also referred to as the “Oracle” or “Sage” of Omaha by global media outlets. Aged 88 and leader of Berkshire Hathaway INC, Warren Buffett has left his mark on the finance and investor markets cementing his legacy in stone. But what makes Warren Buffet such a master investor? What are some of his greatest investments? Let us deep dive into the life and works of Warren Buffet and find the answer to our questions.
To truly understand the mindset and life of Warren Buffet we must first look to his early years. As a child, Buffett showed a keen interest in entrepreneurship; at just 11 years old Warren bought his first stock on the New York Stock Exchange. Following on from his first stock purchase, Warren worked a paper route both mornings and afternoons and through this endeavour in 1944 when he was just 14 years old filed his first tax return -impressive right. Continuing this, Buffett had saved a total of $1,000 from this paper round which is the equivalent to a staggering $14,519 today! Surely this establishes that Warren surely is a savvy saver.
By the age of 15 years old, Warren also sold stamps, Coca-Cola, golf balls and magazines door to door, compare this to a typical 15-year old today who is probably sat on their iPad or say playing a games console. As you can tell Warren sold a wide variety of products which is an early indication of his diversification strategy at play, yet another piece to the puzzle of what makes him a master investor. He then branched out further with a friend at the time and began leasing pinball machines which he would leave in barbershops in the local area. As you can imagine, by 15 years old, this entrepreneur had multiple streams of income, Warren had saved $2,000 -which is the equivalent to $29,000 today! Using these funds, he made his first property purchase and bought a farm in Nebraska, he hired a farm labourer to work the land and used his profits from this endeavour to pay his way through college. Another piece of the Master puzzle can be identified, which is making your money work for you to increase your cash flow.
“If you don't find a way to make money while you sleep, you will work until you die” - Warren Buffett
During college, Buffett read the book the “Intelligent Investor” by Benjamin Graham and his life was changed forever. From this book, Warren planted the seed of knowledge that would aid him to grow into the Master Investor he is today. He had his first lesson in value investing and he wanted to know more. He found out that Graham taught at Colombia Business School and enrolled in his class, Buffett offered to work for Graham for free but Graham declined. However, in 1954 till 1956 Buffett ended up working for Graham at Graham-Newman Corp as a securities analyst and thus shows Buffett's reluctances to not take no for an answer. To chase your vision until it becomes a reality, another piece to the Master Puzzle.
In 1962, Buffett began purchasing shares in Berkshire Hathaway and by 1965 he had taken over the company. Berkshire Hathaway, originally a textile company, when under the leadership of Warren Buffet closed the last of its textile mills and its main focus changed to acquiring acquisitions of other undervalued businesses. The basic principle of value investing is investing when the share price is undervalued compared to its true intrinsic value. This is the principle used by Berkshire Hathaway and when it comes to its acquisitions.
Some of Berkshire Hathaway’s most well-known subsidiaries include NETJETS and FRUIT OF LOOM. However, these are only a handful of companies of which Berkshire Hathaway has a majority share in. The company also has interests in many other companies such as, American Express Co. (AXP), Costco Wholesale Corp. (COST), General Motors Co. (GM), Coca-Cola Co. (KO), just to name a few. A lot of those names you may recognise as world giants within their industries. You may also notice the wide range of industries covered, from energy suppliers to food/beverage manufactures.
Some of Buffett’s largest investments at this current time include; American Express with 17.9% ownership, Apple with 5.4% ownership, Bank of America with 9.5% ownership, Coca-Cola with 9.4% ownership and Wells Fargo with 9.8% ownership. With these 5 companies alone Buffett returned in dividend income almost $7 Billion and that is minus common and preferred dividends paid. Buffett regularly reinvests dividends into purchasing more shares of a company if he deems the share price below true value.
Long before the online Gurus of today, we find Warren at such a young age displaying the most important factors and disciplines in order to attain one's dreams. Investing in his mind through education and books and with all the background information and current investment strategies of Warren Buffett we can now easily see what makes him a master investor in the eyes of so many. It’s as if he was destined to become an investor from birth. From his passionate and hardworking childhood to his forward-thinking youth into his adulthood as a fulltime investor, Warren Buffett has shown and continues to show the tools of what it takes to reach one’s goals and dreams. He chased his dream from the start of his journey, working on multiple sources of income, saving and living below his means. To making his money work for him with diversified investments. Before long finding mentors and not taking no for an answer, to make sure he was around the right minds to aid making his vision a reality. Warren Buffet’s story shows the necessary steps one should be willing to take to attain success.
Warren Buffet has left his mark on this world in more ways than one. However, I’d like to conclude this article with my favourite quote of Buffett’s which sums up his lessons on investing.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” -Warren Buffet?
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