http://investorzclub.blogspot.com Warren Buffett Biography The Story of Berkshire Hathaway's Billionaire Chairman by http://investorzclub.blogspot.com http://investorzclub.blogspot.com 1 A frightened but resilient Warren held his shares until they rebounded to $40. and displayed an amazing aptitude for both money and business at a very early age. 1930 to his father Howard. At only six years old. a stockbroker-turnedCongressman. he managed to graduate in only three years.17 to 41. Slighted. He was finally persuaded to apply to Harvard Business School. Ben Graham . Acquaintances recount his uncanny ability to calculate columns of numbers off the top of his head . Graham realized that the company had bond holdings worth $95 for every share. While other children his age were playing hopscotch and jacks. Buffett stayed two years. it was risky. Buffett took his step into the world of high finance. he waged a proxy war and secured a spot on the Board of Directors. Ben Graham published Security Analysis. a seventeen year old Warren Buffett graduated from High School.a feat Warren still amazes business colleagues with today. one of the greatest works ever penned on the stock market. he searched for stocks that were so inexpensive they were almost completely devoid of risk. Warren Buffett approached graduate studies with the same resistance he displayed a few years earlier. but they refused. It was never his intention to go to college. Shortly thereafter. an oil transportation company managed by the Rockefellers.com 2 .000 delivering newspapers (this is equal to $42. investing in equities had become a joke (the Dow Jones had fallen from 381.81 in 2000). complaining that he knew more than his professors.a mistake he would soon come to regret.com Warren Buffett is Born Warren Edward Buffett was born on August 30. One of his best known calls was the Northern Pipe Line.Buffett's Mentor Ben Graham had become well known during the 1920's. The company sold its bonds and paid a dividend in the amount of $70 per share. When Howard was defeated in the 1948 Congressional race.an experience that would forever change his life.blogspot. Five years later. At a time when the rest of the world was approaching the investment arena as a giant game of roulette. At the time. Doris. He promptly sold them . The stock was trading at $65 a share. he was the second of three children. When he was 40 years old. Shortly after buying the stock.http://investorzclub. Warren Buffett's Education In 1947. Working full-time.610. His father had other plans. but after studying the balance sheet. he had already made $5. rejected him as "too young". Warren applied to Columbia where famed investors Ben Graham and David Dodd taught . The only boy. and urged his son to attend the Wharton Business School at the University of Pennsylvania.blogspot. it fell to just over $27 per share. At eleven years old. The experience taught him one of the basic lessons of investing: patience is a virtue. which. Warren was making money. Warren returned home to Omaha and transferred to the University of Nebraska-Lincoln. pocketing a five cent profit. he purchased three shares of Cities Service Preferred at $38 per share for both himself and his older sister. in the worst admission decision in history. Buffett purchased 6-packs of Coca Cola from his grandfather's grocery tore for twenty five cents and resold each of the bottles for a nickel. Cities Service shot up to $200.22 over the course of three to four short years following the crash of http://investorzclub. The value investor tried to convince management to sell the portfolio. He preferred to hold his spots for Jews who were not hired at Gentile firms at the time. Warren took a course by Dale Carnegie). they made a bed for her in a dresser drawer.what made http://investorzclub. Buffett offered to work for the Graham partnership for free. It turns out that there was a man still working on the sixth floor. introduced the world to Mr. Reading an old edition of Who's Who. unknown insurance company named GEICO. He hopped a train to Washington D. Flying through his graduate studies at Columbia. Warren became interested in how a company worked . The experience would be something that stayed with Buffett for the rest of his life. In an effort to conquer his intense fear of public speaking.com 3 . Through his simple yet profound investment principles. Absolutely determined.a measure of a business's true worth that was completely and totally independent of the stock price. The man was none other than Lorimer Davidson. Disappointingly. Ben turned him down. The relationship eventually turned serious and in April of 1952 the two were married. it was run-down and served as home to several mice. Warren Buffett Returns Home Returning home. Not to be stopped. also named Susie. Using intrinsic value. Thankfully. searching for investment opportunities.the best investment analogy in history. the doors were locked. a conversation that stretched on for four hours. As luck (or fate) would have it. things changed.blogspot. He asked if there was anyone in the building. Warren was crushed. Warren's investments were predominately limited to a Texaco station and some real estate.com 1929). Warren Buffett was the only student ever to earn an A+ in one of Graham's classes.http://investorzclub. was born. there was. The Intelligent Investor. Berkshire Hathaway. investors could decide what a company was worth and make investment decisions accordingly. but neither were successful. Warren Buffett Goes to Work for Ben Graham The couple took a house in the suburbs of New York. he took a job at his father's brokerage house and began seeing a girl by the name of Susie Thompson.C. Buffett relentlessly pounded on the door until a janitor came to open it for him. Warren was finally given the opportunity he had long awaited. When he got there. His subsequent book. It was also during this time he began teaching night classes at the University of Omaha (something that wouldn't have been possible several months before. the Financial Vice President. Buffett spent his days analyzing S&P reports. Market . It was during this time that the difference between the Graham and Buffett philosophies began to emerge. Warren was escorted up to meet him and immediately began asking him questions about the company and its business practices.blogspot. It was here their daughter. It was around this time that Graham came up with the principle of "intrinsic" business value . They rented out a three-room apartment for $65 a month. which Warren celebrates as "the greatest book on investing ever written". Ben Graham became an idyllic figure to the twenty-one year old Warren Buffett. During these initial years. He eventually acquired the entire GEICO company through his corporation. one Saturday morning to find the headquarters. inviting the young stockbroker to come to work for him. In order to save money. Ben Graham called one day. Warren discovered his mentor was the Chairman of a small. both Ben Graham and Warren's father advised him not to work on Wall Street after he graduated. 2 million. a beautiful wife. affectionately nicknamed "Buffett's Folly". while the Dow was up only 74.500.blogspot.156% compared to the Dow's 122. He had attended Harvard Law School without a Bachelor's Degree. to say the least. Munger was brilliant in every sense of the word. A somewhat-celebrity in his hometown. the Buffett Partnership assets were up more than 1. Ltd. Ben simply wanted numbers whereas Warren was predominately interested in a company's management as a major factor when deciding to invest. The shares of Berkshire were distributed among the partners with a letter from Warren informing them that he would. Acting as lord over assets that had ballooned to $44 million dollars. 1956. Warren and Susie's personal stake was $6. Buffett.http://investorzclub.936. had arrived. On May 1. and later. upped the minimum investment to $100.Berkshire and Diversified Retailing. but he had much bigger plans for that pool of money. just as his persona of success was beginning to be firmly established.com 4 . Small. he informed his partners that he was "unable to find any bargains in the current market". Though somewhat snobbish.3%.000 in the process. Warren built his personal capital up to $140. a man by the name of Charlie Munger moved back to his childhood home of Omaha from California. and a very successful business. he was managing around $300. be involved in the http://investorzclub. In May 1969. raising $105. Graham looked only at the balance sheet and income statement. Over the course of the next five years. the partnership had capital in excess of $7.com it superior to competitors.000. as they say.0% gain in value. he liquidated the partnership. He put in $100 himself. recording a 59. Warren Buffett rounded up seven limited partners which included his Sister Doris and Aunt Alice.9%. Before the end of the year. By 1962. the partnership pulled its biggest coup in 1968. and managed his partnerships originally from the bedroom. Warren went much further than closing the fund to new accounts. In one decisive move. Ten years after its founding. Mr. Warren Buffett closed the partnership to new accounts. and opened an office in Kiewit Plaza on Farnam street. He purchased a house for $31.0% profit. By this time.800. Between 1950 and 1956.". He also had more than 90 limited partners across the United States. he had three children.000 in capital. the Buffett partnerships racked up an impressive 251. In 1962. his life had begun to take shape.blogspot. The Vietnam war raged full force on the other side of the world and the stock market was being driven up by those who hadn't been around during the depression.rather Warren was entitled to 1/4 of the profits above 4%). providing the roots for a friendship and business collaboration that would last for the next forty years. he melded the partnerships into a single entity called "Buffett Partnerships Ltd. All while voicing his concern for rising stock prices. Introduced by mutual friends. he could care less about corporate leadership. with the exception of two companies . he set his sights back on Omaha and began planning his next move. Buffett and Charlie were immediately drawn together. Warren never gave stock tips despite constant requests from friends and strangers alike. Buffett spent the remainder of the year liquidating the portfolio. Wisely enough. a small office. With this war chest.000 from a mere $9. of which a cool $1 million was Buffett's personal stake (he didn't charge a fee for the partnership . officially creating the Buffett Associates. in some capacity. catapulting to over $104 million in assets. The next year.849. the company had become his sole investment vehicle. Warren said he "must have been in the bathroom when the dividend was declared". The balance sheet reflected what Californians already knew . The gourmet chocolate maker sold its own brand of candies to its customers at a premium to regular confectionary treats.http://investorzclub. textile profits were a pitiful $45. the target company. he owned 29%. On May 10. Warren named himself Director. a $17 premium above its then-trading price of $33. Years later. Following several investments and an SEC investigation (after causing a merger to fail. Buffett named himself Chairman of the Board of Berkshire Hathaway and for the first time. In 1970.6 million dollars.they were more than willing to pay a bit "extra" for the special "See's" taste.com 5 . in 1967. giving him complete autonomy over the organization.com business. The paltry cash brought in from the struggling looms in New Bedford. Asked what he thought the company was worth. A year or so later. http://investorzclub. It was the biggest investment Berkshire or Buffett had ever made. Buffett made Ken Chace President of the company. Two years later. From 1965 to 1975. Massachusetts had provided the stream of capital necessary to start building Berkshire. Not surprisingly.6 million dollars. Warren offered to buy the whole company on the spot . Ringwalt told Buffett at least $50 per share. It never happened again. he had invested more than $15.000.000 for his new President to purchase 1.a move that cost him $8. Warren agreed to cosign a loan for $18. but was under no obligation to them in the future. Warren and Munger offered to buy the stock of Wesco.blogspot. Although he refused to award stock options on the basis that it was unfair to shareholders. 1965. The businessman decided Berkshire would be willing to purchase the company for $25 million in cash. while insurance and banking each brought in $2. the government didn't believe them). Berkshire paid out a dividend of 10 cents on its outstanding stock. after accumulating 49% of the common stock. Warren asked National Indemnity's founder and controlling shareholder Jack Ringwalt to his office.1 and $2. Warren Buffett Gains Control of Berkshire Hathaway Buffett's role at Berkshire Hathaway had actually been somewhat defined years earlier. and he was certain with a bit of tweaking. With no personal holdings. That same year. the Chairman's capital allocation began to display his prudence. That same year. This brought his ownership to over 43% of the stock with Susie holding another 3%. the company's book value rose from $20 per share to around $95. Immediately Mr. His entire fortune was placed into Berkshire. Terrible management had run the company nearly into the ground. it could be run better.blogspot. Warren was clear in his intention to hold onto his own stake in the company (he owned 29% of the Berkshire Hathaway stock) but his intentions weren't revealed. wrote the letter to the shareholders (Ken Chace had been responsible for the task in the past).45 per share). but soon conceded. Buffett began to see Berkshire's net worth climb.4 million dollars into the company at an average cost of $32. See's owners were holding out for $30 million. at the inflated price simply because they thought it was "the right thing to do". It was also during this period that Warren made his final purchases of Berkshire stock (when the partnership dolled out the shares.000 shares of the company's stock. Warren Buffett was offered the chance to buy a company by the name of See's Candy. Within the year. Eventually.000 salary he received. and organizations). speaking every day. all with Susie's blessing. The plan was a huge success and over the years the amount was upped for each share.blogspot. he had made $3 million dollars. Susie had been "the sunshine and rain in my [his] garden".com 6 . The company had recently reported amazingly high losses and its stock was pummeled down to $2 per share. Benjamin Graham. During this time." This prompted Warren to start investing for his personal life. the humanitarian / singer secured an apartment in San Francisco and. "Everything I got is tied up in Berkshire. she moved in with Buffett. insisting she wanted to live on her own. The program was eventually discontinued after associates at one of Berkshire's subsidiaries. Berkshire built up its position in this ailing insurer and reaped millions in profits. Susie called several women in the Omaha area and insisted they go to dinner and a movie with her husband. I'd like a few nickels outside. Berkshire announced a new charity plan which was thought up by Munger and approved by Warren. taking their annual two-week New York trip. Warren was far more speculative with his own investments. the decade of greed. moved there. In a short time. The two remained close. Changes in Warren Buffett's Personal Life It was shortly thereafter one of the most profound and upsetting events in Buffett's life took place. At one point he bought copper futures which was unadulterated speculation. a waitress. Buffett once again became involved with GEICO. According to Roger Lowenstein's "Buffett". The plan called for each shareholder to designate charities which would receive $2 for each Berkshire share the stockholder owned. and Buffett's personal wealth was almost $140 million. who still held his fortune in the company. Berkshire Hathaway's stock was trading at more than $290 a share. most of the problem were caused by an inept management. the insurance giant would become a fully owned subsidiary of Berkshire. all to their own causes. In 1981. Over the next few years. Buffett once again showed his tendency of bucking the popular trend.http://investorzclub. eventually. shortly before the turnaround. This was in response to a common practice on Wall Street of the CEO choosing who received the company's hand-outs (often they would go to the executive's schools. but he eventually grew somewhat accustomed to the new arrangement. throughout his life. the Berkshire shareholders were giving millions of dollars away each year. The http://investorzclub. meaning his entire available cash was the $50. he made a comment to a broker.com In 1976. When prompted to invest in real estate by a friend. Warren wisely realized that the basic business was still in tact. The irony was that Warren never sold a single share of his company. and meeting the kids at their California Beach house for Christmas get-togethers. Although she remained married to Warren. churches. he responded "Why should I buy real estate when the stock market is so easy?" Berkshire Hathaway Announces Charitable Giving Program Later. the his reputation had grown to the point that the rumor Warren Buffett was buying a stock was enough to shoot its price up 10%. Warren Buffett Wants Two Nickels to Rub Together By the late '70s. The transition was hard for the businessman. At forty-five. she set Warren up with Astrid Menks.in form. Susan Buffett left her husband . Years later. died in in September of the same year. Warren was absolutely devastated.blogspot. Scott Fetzer and an Airplane for Berkshire Hathaway For all the fine businesses Berkshire had managed collect. His old neighbor. It was quite a strong one. who had owned a quarter of a million shares.com Pampered Chef. S&F was panicking. Blumpkin's answer was a simple "yes". Speaking to Mrs. one of the best was about to come under its stable. Most of the gains could be attributed to Berkshire's stock portfolio which was now valued at over $1. the Chairman. as local residents called her. to which she responded she would part for "$60 million". The maker of Kirby vacuum cleaners and World Book encyclopedia. As he had become increasingly recognizable. The company itself had been the target of a hostile takeover when an LPO was launched by Ralph Schey. This was one of "Mr. Berkshire offered $60 per share in cold. After http://investorzclub. the only bump in the road being the crash of 1987. Warren. in part. When the deal was wrapped up less than a week later.600 to as high as $80. the multi-million dollar furniture retailer built from scratch by Rose Blumpkin. The Russian-born immigrant merely folded the check without looking at it when she received it days later.3 billion dollars. Unfazed. noticed someone was loading up on shares and became concerned. B. In 1986. who wasn't upset about the market correction. Far more impressive things were to be done in the next decade. Another important event around this time was the stock price which hit $750 per share in 1982.http://investorzclub. Scott & Fetzer was another great addition to the Berkshire family. Market's" temporary aberrations.blogspot. Buffett. The passion for jets eventually.com 7 .blogspot. he started buying up Coca-Cola stock like an addict. now the President of Coca-Cola. I'll Take a Coke A year later. The idea of the luxury was hard for him to adjust to. Warren plowed on. but he loved the jet immensely. experienced discrimination because of the controversal pro-choice charities Buffett chose to allocate his pro-rated portion of the charitable contribution pool. The 80's went on with Berkshire increasing in value as if on cue.000. It was representative of how he viewed stocks and businesses in general. fully one-fourth of Berkshire's market cap was wiped out. The year was 1984 and Ivan Boesky soon launched a counter offer for $60 a share (the original tender offer stood at $50 a share $5 above market value). in 1988. Warren Buffett walked into Nebraska Furniture Mart. led him to purchase Executive Jet in the 90's. Buffett asked if she would be interested in selling the store to Berkshire Hathaway. Berkshire Hathaway had a new $315 million dollar cash-generating powerhouse to add to its collection. dropped a message to the company asking them to call if they were interested in a merger. In 1983. cash. The phone rang almost immediately. Berkshire would see its share price climb from $2. Warren Buffett Buys Nebraska Furniture Mart. The small stream of cash that was taken out of the struggling textile mill had built one of the most powerful companies in the world.000 in the 1990's. The deal was sealed on a handshake and one page contract was drawn up. calmly checked the price of his company and went back to work. Buffett bought a used Falcon aircraft for $850. hard. it was no longer comfortable for him to fly commercially. He immediately thought of Buffett.000 per share. Berkshire's stock recovered to its previous levels after falling to around $45.http://investorzclub. Even with this astronomical feat. worth more than $3. Confident that the technology bubble would burst. and the man from Omaha was once again seen as an investment icon. Buffett was now. personally. Warren Buffett continued to do what he did best: allocate capital into great businesses that were selling below intrinsic value. several newspapers ran stories about the demise of the Oracle.blogspot.5% per share.000 per share. whom he called. Buffett's Coca-Cola stock would be worth more than the entire value of Berkshire when he made the investment. the stock catapulted as high as $80. Within three years.8 billion dollars. there were much darker times ahead (read The Solomon Scandal). Within the next ten years. http://investorzclub. Berkshire owned 7% of the company. Berkshire Hathaway was trading at $8.blogspot. he would be worth ten times that amount.02 billion dollars worth of the stock. When the markets finally did come to their senses.com 8 . Warren confessed to being the culprit and requested they don't speak of it until he was legally required to disclose his holdings at the 5% threshold. Before that would happen.com researching the transactions. he noticed the trades were being placed from the Midwest. or $1. when Berkshire reported a net increase of 0. Warren Buffet at the Turn of the Millennium During the remainder of the 1990's. In 1999. Warren Buffett was accused of "losing his touch". Warren Buffett's Money and Reputation On the Line During the Solomon Scandal By 1989. Within a few months. as the dot-com frenzy began to take hold. Warren Buffett was once again a star.000 a share. His efforts did not go unrewarded.