Investment career Warren Buffett

1 investment career

1.1 business career
1.2 assuming berkshire
1.3 billionaire
1.4 2007-08 financial crisis
1.5 capitalized berkshire

investment career

early business career

buffett worked 1951 1954 @ buffett-falk & co. investment salesman; 1954 1956 @ graham-newman corp. securities analyst; 1956 1969 @ buffett partnership, ltd. general partner , 1970, chairman , ceo of berkshire hathaway inc.

in april 1952, buffett discovered graham on board of geico insurance. taking train washington, d.c. on saturday, knocked on door of geico s headquarters until janitor admitted him. there met lorimer davidson, geico s vice president, , 2 discussed insurance business hours. davidson become buffett s lifelong friend , lasting influence, , later recall found buffett extraordinary man after fifteen minutes. buffett wanted work on wall street; however, both father , ben graham urged him not to. offered work graham free, graham refused.

buffett returned omaha , worked stockbroker while taking dale carnegie public speaking course. using learned, felt confident enough teach investment principles night class @ university of nebraska-omaha. average age of students more twice own. during time purchased sinclair texaco gas station side investment. however, not successful.

in 1952, buffett married susan thompson @ dundee presbyterian church. next year had first child, susan alice. in 1954, buffett accepted job @ benjamin graham s partnership. starting salary $12,000 year (about $107,000 today). there worked closely walter schloss. graham tough boss. adamant stocks provide wide margin of safety after weighing trade-off between price , intrinsic value. argument made sense buffett questioned whether criteria stringent , caused company miss out on big winners had other appealing features. same year buffetts had second child, howard graham. in 1956, benjamin graham retired , closed partnership. @ time buffett s personal savings on $174,000 (about $1.53 million today) , started buffett partnership ltd.

buffett s home in omaha, nebraska

in 1957, buffett operated 3 partnerships. purchased five-bedroom stucco house in omaha, still lives, $31,500. in 1958 buffetts third child, peter andrew, born. buffett operated 5 partnerships year. in 1959, company grew 6 partnerships , buffett met future partner charlie munger. 1960, buffett operated 7 partnerships. asked 1 of partners, doctor, find ten other doctors willing invest $10,000 each in partnership. eleven agreed, , buffett pooled money mere $100 original investment of own.

in 1961, buffett revealed 35% of partnership s assets invested in sanborn map company. explained sanborn stock sold $45 per share in 1958, company s investment portfolio worth $65 per share. meant sanborn s map business being valued @ minus $20. buffett purchased 23% of company s outstanding shares activist investor, obtaining seat himself on board of directors, , allied other dissatisfied shareholders control 44% of shares. avoid proxy fight, board offered repurchase shares @ fair value, paying portion of investment portfolio. 77% of outstanding shares turned in. buffett had obtained 50% return on investment in 2 years.

assuming berkshire

in 1962, buffett became millionaire because of partnerships, in january 1962 had excess of $7,178,500, of on $1,025,000 belonged buffett. merged these partnerships one. buffett invested in , took control of textile manufacturing firm, berkshire hathaway. began buying shares in berkshire seabury stanton, owner, whom later fired. buffett s partnerships began purchasing shares @ $7.60 per share. in 1965, when buffett s partnerships began purchasing berkshire aggressively, paid $14.86 per share while company had working capital of $19 per share. did not include value of fixed assets (factory , equipment). buffett took control of berkshire hathaway @ board meeting , named new president, ken chace, run company. in 1966, buffett closed partnership new money. later claimed textile business had been worst trade. moved business insurance sector, and, in 1985, last of mills had been core business of berkshire hathaway sold. buffett wrote in letter: ... unless appears circumstances have changed (under conditions added capital improve results) or unless new partners can bring asset partnership other capital, intend admit no additional partners bpl.

in second letter, buffett announced first investment in private business — hochschild, kohn , co, privately owned baltimore department store. in 1967, berkshire paid out first , dividend of 10 cents. in 1969, following successful year, buffett liquidated partnership , transferred assets partners. among assets paid out shares of berkshire hathaway. in 1970, buffett began writing now-famous annual letters shareholders. however, lived solely on salary of $50,000 per year , outside investment income. in 1979, berkshire began year trading @ $775 per share, , ended @ $1,310. buffett s net worth reached $620 million.

in 1973, berkshire began acquire stock in washington post company. buffett became close friends katharine graham, controlled company , flagship newspaper, , joined board. in 1974, sec opened formal investigation buffett , berkshire s acquisition of wesco financial, due possible conflict of interest. no charges brought. in 1977, berkshire indirectly purchased buffalo evening news $32.5 million. antitrust charges started, instigated rival, buffalo courier-express. both papers lost money, until courier-express folded in 1982.

in 1979, berkshire began acquire stock in abc. capital cities announced $3.5 billion purchase of abc on march 18, 1985 surprising media industry, abc 4 times bigger capital cities @ time. buffett helped finance deal in return 25% stake in combined company. newly merged company, known capital cities/abc (or capcities/abc), forced sell stations due u.s. federal communications commission ownership rules. 2 companies owned several radio stations in same markets.

in 1987, berkshire hathaway purchased 12% stake in salomon inc., making largest shareholder , buffett director. in 1990, scandal involving john gutfreund (former ceo of salomon brothers) surfaced. rogue trader, paul mozer, submitting bids in excess of allowed treasury rules. when brought gutfreund s attention, did not suspend rogue trader. gutfreund left company in august 1991. buffett became chairman of salomon until crisis passed.

in 1988, buffett began buying coca-cola company stock, purchasing 7% of company $1.02 billion. turn out 1 of berkshire s lucrative investments, , 1 still holds.

as billionaire

buffett became billionaire when berkshire hathaway began selling class shares on may 29, 1990, market closing @ us$7,175 share. in 1998 acquired general re (gen re) subsidiary in deal presented difficulties—according rational walk investment website, underwriting standards proved inadequate, while problematic derivatives book resolved after numerous years , significant loss. gen re later provided reinsurance after buffett became involved maurice r. greenberg @ aig in 2002.

buffett meets president barack obama @ white house in july 2011

during 2005 investigation of accounting fraud case involving aig, gen re executives became implicated. on march 15, 2005, aig board forced greenberg resign post chairman , ceo after new york state regulators claimed aig had engaged in questionable transactions , improper accounting. on february 9, 2006, aig agreed pay us$1.6 billion fine. in 2010, u.s. government agreed us$92 million settlement gen re, allowing berkshire hathaway subsidiary avoid prosecution in aig case. gen re made commitment implement corporate governance concessions, required berkshire hathaway’s chief financial officer attend general re’s audit committee meetings , mandated appointment of independent director.

in 2002, buffett entered in us$11 billion worth of forward contracts deliver u.s. dollars against other currencies. april 2006, total gain on these contracts on us$2 billion. in 2006, buffett announced in june gradually give away 85% of berkshire holdings 5 foundations in annual gifts of stock, starting in july 2006—the largest contribution go bill , melinda gates foundation.

in 2007, in letter shareholders, buffett announced looking younger successor, or perhaps successors, run investment business. buffett had selected lou simpson, runs investments @ geico, fill role; however, simpson 6 years younger buffett.

2007-08 financial crisis

buffett ran criticism during subprime crisis of 2007–2008, part of recession started in 2007, had allocated capital resulting in suboptimal deals. buy american. am. wrote opinion piece published in new york times in 2008. buffett called downturn in financial sector started in 2007 poetic justice . buffett s berkshire hathaway suffered 77% drop in earnings during q3 2008 , several of later deals suffered large mark-to-market losses.

berkshire hathaway acquired 10% perpetual preferred stock of goldman sachs. of buffett s put options (european exercise @ expiry only) wrote (sold) running @ around $6.73 billion mark-to-market losses of late 2008. scale of potential loss prompted sec demand berkshire produce, more robust disclosure of factors used value contracts. buffett helped dow chemical pay $18.8 billion takeover of rohm & haas. became single largest shareholder in enlarged group berkshire hathaway, provided $3 billion, underlining instrumental role during crisis in debt , equity markets.

in 2008, buffett became richest person in world, total net worth estimated @ $62 billion forbes , @ $58 billion yahoo, overtaking bill gates, had been number 1 on forbes list 13 consecutive years. in 2009, gates regained top position on forbes list, buffett shifted second place. both of men s values dropped, $40 billion , $37 billion respectively—according forbes, buffett lost $25 billion on 12-month period during 2008/2009.

in october 2008, media reported buffett had agreed buy general electric (ge) preferred stock. operation included special incentives: received option buy three billion shares of ge stock, @ $22.25, on 5 years following agreement, , buffett received 10% dividend (callable within 3 years). in february 2009, buffett sold procter & gamble co. , johnson & johnson shares personal portfolio.

in addition suggestions of mistiming, wisdom in keeping of berkshire s major holdings, including coca-cola company, in 1998 peaked @ $86, raised questions. buffett discussed difficulties of knowing when sell in company s 2004 annual report:

that may seem easy when 1 looks through always-clean, rear-view mirror. unfortunately, however, s windshield through investors must peer, , glass invariably fogged.

in march 2009, buffett said in cable television interview economy had fallen off cliff ... not has economy slowed down lot, people have changed habits haven t seen . additionally, buffett feared inflation levels occurred in 1970s—which led years of painful stagflation—might re-emerge.

a capitalized berkshire

buffett in 2015 @ annual berkshire shareholders meeting

on august 14, 2014, price of berkshire hathaway s shares hit us$200,000 share first time, capitalizing company @ us$328 billion. while buffett had given away of stock charities time, still held 321,000 shares worth us$64.2 billion. on august 20, 2014, berkshire hathaway fined $896,000 failing report december 9, 2013 purchase of shares in usg corporation required.

in 2009, buffett invested $2.6 billion part of swiss re s campaign raise equity capital. berkshire hathaway owned 3% stake, rights own more 20%. in 2009, buffett acquired burlington northern santa fe corp. $34 billion in cash , stock. alice schroeder, author of snowball, said key reason purchase diversify berkshire hathaway financial industry. measured market capitalization in financial times global 500, berkshire hathaway eighteenth largest corporation in world of june 2009.

in 2009, buffett divested failed investment in conocophillips, saying berkshire investors,

i bought large amount of conocophillips stock when oil , gas prices near peak. in no way anticipated dramatic fall in energy prices occurred in last half of year. still believe odds oil sells far higher in future current $40–$50 price. far have been dead wrong. if prices should rise, moreover, terrible timing of purchase has cost berkshire several billion dollars.

the merger burlington northern santa fe railway (bnsf) closed upon bnsf shareholder approval in 1q2010. deal valued @ approximately $34 billion , represented increase of existing stake of 22%.

in june 2010, buffett defended credit-rating agencies role in financial crisis, claiming:

very, few people appreciate bubble. s nature of bubbles – re mass delusions.

on march 18, 2011, goldman sachs given federal reserve approval buy berkshire s preferred stock in goldman. buffett had been reluctant give stock, averaged $1.4 million in dividends per day, saying:

i m going osama bin laden of capitalism. m on way unknown destination in asia m going cave. if u.s. armed forces can t find osama bin laden in 10 years, let goldman sachs try find me.

in november 2011, announced on course of previous 8 months, buffett had bought 64 million shares of international business machine corp (ibm) stock, worth around $11 billion. unanticipated investment raised stake in company around 5.5 percent—the largest stake in ibm alongside of state street global advisors. buffett had said on numerous prior occasions not invest in technology because did not understand it, move came surprise many investors , observers. during interview, in revealed investment public, buffett stated impressed company s ability retain corporate clients , said, don t know of large company has been specific on intend , how intend ibm.

in may 2012, buffett s acquisition of media general, consisting of 63 newspapers in south-eastern u.s., announced. company second news print purchase made buffett in 1 year.

interim publisher james w. hopson announced on july 18, 2013 press of atlantic city sold buffett’s bh media group abarta, private holding company based in pittsburgh, u.s. @ berkshire shareholders meeting in may 2013, buffett explained did not expect move needle @ berkshire newspaper acquisitions, anticipates annual return of 10 percent. press of atlantic city became berkshire s 30th daily newspaper, following other purchases such virginia, u.s. roanoke times , tulsa world in oklahoma, u.s.

during presentation georgetown university students in washington, d.c. in late september 2013, buffett compared u.s. federal reserve hedge fund , stated bank generating $80 billion or $90 billion year in revenue u.s. government. buffett advocated further on issue of wealth equality in society:

we have learned turn out lots of goods , services, haven’t learned how have share in bounty. obligation of society prosperous ours figure out how nobody gets left far behind.

after difficulties of economic crisis, buffett managed bring company pre-recession standards: in q2 2014, berkshire hathaway made $6.4 billion in net profit, had ever made in three-month period.