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Now most people watching this probably know Warren Buffett to be a rich investor, but aside from that fact, who is Warren Buffett? And how did Buffett become the richest and most famous investor? And what can we learn from Buffett’s investment philosophy? These are some of the questions I plan to answer today.
And read on to the end, as I highlight one of my favorite things about Warren Buffett!
So who is Warren Buffett, is he just one of the richest guys in the world and someone who hoards all his cash rather than using his immense wealth and influence for good?
Well, no doubt he’s rich, roughly $150bn rich, and has been one of the world’s richest men for around 20 years, but what else is really interesting about Buffett? Firstly, and maybe most interestingly, he is the most generous philanthropist in the world, meaning, to date, he has given away around $60bn over his lifetime, yes billion including about $5bn last year. He has also promised to give away more than 99% of his wealth before or at the time of his death. Think about that, there are not many people, let alone mega-rich people, that give away more than 99% of their wealth. This generosity is an often-overlooked fact about Buffett.
What’s interesting about Buffett’s personal life? He’s got three children to his first wife, Susie, who sadly passed away about 20 years ago. Nothing too remarkable here yet, but the interesting part is Buffett got married in 1952 and then had his three children, 25 years later they stopped living together in 1977. Again, somewhat common nowadays. Here’s the truly interesting part, when they stopped living together in 1977, Susie, his wife, introduced him to another lady, Astrid, who then moved in to live with Buffett and they have been together since then. They all remained very close and even signed Christmas cards, Warren, Susie and Astrid. Buffett went on to marry Astrid in 2006, nearly 30 years later, only after Susie had passed away a couple of years prior. Interesting right, but not the most interesting part, a few months before Susie passed away in 2004, she did an interview on the Charlie Rose show. You would not believe me if I quoted her, so I added a clip from that show in my YouTube video demonstrating what she personally thought of Buffett, it’s really heartfelt and genuine, so please watch that. And realise, this is after 27 years of living apart. There are not many wives that speak about their husbands in this way, especially after living separating.
So what does Buffett plan to do with his remaining $150bn? Buffett plans to donate his remaining stock of Berkshire Hathaway, currently valued at around $150bn, to a charitable trust managed by his three children. They will then have 10 years to give the money away. Yet another remarkable decision.
Taking a step back, what about Buffett’s childhood and early life? Buffett loved numbers and business and was entrepreneurial from an early age. At 6, yes 6 years old, he was selling packs of gum and Coca-Cola bottles door-to-door. I have to ask, what were you doing at 6 years old? I certainly wasn’t doing this. At 11, he made his first stock purchase, buying three shares of Cities Service Preferred for himself and his sister. Already being generous.
By the time he was a teenager, Buffett had several small businesses. He delivered newspapers, which earned him around $175 per month – more than most teachers earned at the time. At 15, he invested $1,200 of his earnings in a 40-acre farm, which he rented out, demonstrating his early knack for investing and generating passive income. Yes, back in the 1940s you could buy 40 acres in America for $1,200!
Buffett went to university, getting a degree in business. He then applied to Harvard Business School but was rejected. He later enrolled at Columbia Business School, after learning Benjamin Graham, author of Buffett’s favourite book, The Intelligent Investor, taught there, Graham is also widely considered the father of value investing. Buffett was heavily influenced by Graham’s book. After graduating in 1951, Buffett first worked at his father’s firm as an investment salesman for a few years before going on to work for his mentor Benjamin Graham in New York, as a securities analyst for a few years. There Buffett learned the intricacies of value investing before returning to Omaha in 1956 and started his own investment firm, the Buffett Partnership Ltd., at age 26, with $105,000 from family and friends. He utilised Graham’s strategy of buying undervalued stocks and grew the partnership’s assets significantly over the next decade.
In the early 1960s, Buffett began buying shares of Berkshire Hathaway, at the time, a struggling textile company. Initially, it was an investment, but after a disagreement with management, Buffett took control of the company in 1965. Buffett then shifted Berkshire Hathaway’s focus from textiles to a diversified holding company.
So what can we learn about Buffet’s investing philosophy? I think his philosophy can be somewhat easily summarised by this famous Buffett quote: “Our favourite holding period is forever.”
Buffett has a value-investing strategy, this means, buying undervalued companies with a strong competitive advantage (often referred to having a moat around their business or a high barrier to entry), along with good quality management, and of course, a reasonable valuation with strong fundamentals and then…holding them for the long-term. Buffett also famously looks for businesses he can understand.
Another famous quote of his is, “The basic idea of investing is to look at stocks as businesses, then use the market’s fluctuations to your advantage, and seek a margin of safety.”
So how has Buffett’s strategy worked out? He has consistently outperformed the S&P 500 over decades, which is a staggering statistic of Buffett’s success.
Some other interesting, but lesser known, facts? Every year, Buffett holds an annual general meeting, customary for public companies, but unlike most companies, his meetings are like a festival, lasting a few days and typically attended by tens of thousands of investors from all over the world. Accompanying these annual meetings, are Buffett’s annual letters to shareholders. They are famous for their plainspoken insightful analysis and advice and are definitely worth reading. I will include a link to them in the description below.
To invest with Buffett, you can buy one of two classes of shares in Berkshare Hathaway. His A-class shares, which have voting powers, and his B-class which do not. In general, most companies like to keep their shares valued around $100 each to make them accessible to most investors. What this means is as the value goes up, they split their stock into smaller amounts doing a ‘stock split’ and returning the price to near $100. Buffett has famously never done this for his A-class shares. Meaning that back in 1965 when Buffett took control of Berkshire Hathaway, shares were valued at around $19 per share. Today those shares are worth a staggering $700,000 per share. Yes, one share is more than the price of most average homes!
Another interesting fact is Buffett’s portfolio is generally made up of three main segments.
First, the public or listed companies, so Apple, Coca Cola, American Express, etc., in total about 40 separate stock holdings at the moment. These companies, and what Buffett is doing with them, buying/selling/holding, generally make up the greatest focus of media attention for Buffett. But interestingly, the value of this portfolio is only around 30% of this total portfolio at present. Second, are his private or non-listed companies he either owns outright as a wholly owned subsidiary or has a majority stake in. These companies are much rarely focused on in the media but they make up another 30% of Berkshire’s total portfolio and include widely known brands like GEICO insurance and Duracell batteries, but also lesser known multi-billion dollar companies like Burlington Northern Santa Fe, a freight railroad company, McLane Company, a supply chain company with 80 massive distribution centres across the US supplying all sorts of grocery and drug stores, Precision Castparts, an aerospace components company, Lubrizol, a chemical company most known for its motor oil. In total, Berkshire owns or controls a further 67 companies and employs around 400,000 workers. It’s truly massive. I’ll include a link in the description below with a list of his privately held companies, which is quite interesting.
And finally, the last major part of Berkshire is its cash and cash equivalents, which recently have come under significant media attention, as Buffett has increased this proportion significantly over 2024 and now has around $325bn making it again another 30% of his total portfolio is now cash. It is worth mentioning that Buffett almost always has a significant amount of cash, as his companies generate significant free cash flow so his cash hoard is always growing, even without him selling his stock holdings. This also allows him to always be ready to take advantage of great opportunities which come up.
So finally, what’s the most interesting fact about Buffett, for me personally? That is, despite his immense wealth and him being a billionaire many times over…for many decades, he still lives in the same modest home he bought back in 1958 for about $30,000 in Omaha, Nebraska. That is equivalent to buying a home today for about $350,000. He doesn’t own flashy cars, yachts, houses all over the world, he lives a very relatable life, even driving himself to work each day in a 2014 Cadillac and often buying himself McDonald’s for breakfast on the way into work. All while being 94 years old. Just take all that in, he’s worth 150 times more than the biggest lottery draw to have ever been won, yet he hasn’t spent much at all on a grand lifestyle. Living in the same home for nearly 65 years, a modest car, no fancy chef, just eats McDonald’s and hardly anything else opulent. He continues to run a 1 TRILLION dollar company and pays himself a $100,000 annual salary. Most CEO’s of trillion-dollar companies pay themselves hundreds of millions each year, not $100k. So yeah, he clearly takes great pride in making money but he doesn’t do it for anything more than the game of creating the biggest number he can and in the end is going to give it all away. What a remarkable man.
So in summary, I’m not sharing Buffett’s story to make you feel bad for not having started investing in stocks by the time you were 11 or running businesses and buying land at 15. I’m just sharing it to hopefully inspire you to see what is possible if you have a plan and commit to it for a long period of time. Warren didn’t become a billionaire until he was 56 and then he continued with his plan for now four more decades. So while the main theme of making money today is to get rich quick with crypto and whatever else, Buffett is one of the best examples of getting rich, well mega rich, slowly and doing it for nothing more than proving what can be achieved, not for flashy material things. And doing it with a clear investing methodology, a lot of patience and time and of course the 8th wonder of the world, compounding. Please read and watch my recent post and about the magical power of compounding by clicking here.
If you liked today’s post and video, then please consider bookmarking my website and subscribing to my YouTube channel, as I plan to create more posts and videos like this about other investing legends. Along with plenty of other interesting and hopefully helpful content on financial topics. So come along! I will also do my best to make it fun to learn about these things! And please submit any questions or ideas you would like me to discuss in a future post or video.
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