Far and away the most famous and successful stock market investor of all time, Warren Buffett has amassed a fortune of more than US$50 billion in a career spanning more than half a century. From an early age, Buffett demonstrated his liking for the stock market, buying his first parcel of shares at the age of 11. From here, Buffett established his entrepreneurial traits, setting up several businesses before he had finished high school. The first was the purchase of a pinball machine which he installed in a barber shop, netting him US$1200. He took this money and bought himself some farm land, which he rented out to tenant farmers. And all this before graduating from high school!
Buffett’s interest in the stock market was further enhanced after reading Benjamin Graham’s book “The Intelligent Investor”, which lead to Buffett applying to Columbia University, where Graham was a teacher. There Buffett obtained his Master’s degree in economics in 1951 and, in the process, formed many of his investment philosophies which he would use throughout his life. From here, Buffett worked for a short time in a large investment firm, before returning to his home town of Omaha and setting up the first of what were to be many investment partnerships. Over the next 14 years, Buffett achieved more than a 30% compounded return, at a time when the Index was averaging 10%. It was during this time that Buffett started purchasing shares in textiles company Berkshire Hathaway, which he ended up taking over in 1969. This was to become his major investment vehicle, dissolving all other partnerships. It was here where he met lifetime friend and business partner, Charlie Munger.
Buffett used Berkshire Hathaway’s excess cash to purchase private companies as well as shares in public companies. His early focus was on insurance businesses due to the large cash balances they were required to hold in order to pay out claims. Buffett then began to adapt his investment approach, which up until then was based purely on what he had learned from Benjamin Graham. Thanks largely to the influence of Charlie Munger, Buffett was able to further diversify his investment strategy. Together they invested based on fundamentals, placing large importance on earnings growth and competitive advantage, as well as looking for a high return on invested capital.
Buffett’s humble and kind nature makes him one of the most popular figures in the US. This is evident by the number of people that flock to Omaha each year to hear him speak at the annual general meeting of Berkshire Hathaway. Last year, there were in excess of 50,000 attendees. He still resides in the house he bought in 1958 for US$31,500 and has donated over US$30 billion dollars to charity, by far the largest single contribution in history. And as the head of a multi-billion dollar corporation, Buffett takes home an honest annual salary of $100,000.