Editor’s note: This article was first published in September 2010. Its statement that Buffett has never invested in technology companies, along with the ages and recent events it mentions, reflects that year; Berkshire Hathaway later bought IBM in 2011 and became one of Apple’s largest shareholders from 2016.
Some people think Warren Buffett was born with an innate gift for investing, while others think he simply got the right education and training. What is clear is that Buffett had been learning the basic principles of becoming an investor since he was nine years old.
Update: Video documentary on Warren Buffett (Inside the mind of a genius)
By the age of 10 he had learned about work, saving and reinvesting capital. He started out buying packs of Coca-Cola at the supermarket and selling the bottles to his school friends, at a higher price, of course. He reinvested 50% of the profits in buying more stock to sell, and put the other 50% into his financial education: magazines and books about the stock market were what this 11-year-old boy read. Before he was even interested in girls, Warren already knew he wanted to get into the fascinating world of the stock market.
Warren Edward Buffett was born in Omaha on 30 August 1930. He received his financial training from the renowned Benjamin Graham, author of The Intelligent Investor. Graham had a reputation for being very tough when grading his students. It is said that Warren Buffett received the best grade Graham ever gave in his entire career.
By the age of 26, Warren Buffett already had his first investment company, and in 1965 he acquired his “pride and joy”, Berkshire Hathaway, a textile company that was going through the worst financial period in its history. Buffett bought the company hoping to turn it around. He was right. It was his first million-dollar deal, as the shares soon shot up.
Warren Buffett is known as a visionary and a spotter of business opportunities, which has earned him the nickname “the Oracle of Omaha”. People who deal with him describe him this way: he can find light in a dark room.
His investment strategies are very simple to describe. Buy a good company that is going through temporary financial trouble. Buy low to sell high, and he certainly defines himself as a long-term investor.
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
In the 1973 recession, when the stock market fell and many big investors lost money, Warren made money. He has achieved returns of 800% in less than 11 years, as with his investment in Coca-Cola shares, on which he made a 900% return in 12 years.
He considers himself an old-fashioned investor with firm ideas, and he follows the principle of only investing in a business when he understands it. If he doesn’t know how it works, he doesn’t invest. That is why, to this day, Warren has not invested in technology companies. He doesn’t own a single share in companies like Google or Microsoft.
He loves businesses whose management is focused on delivering value to shareholders, and he doesn’t like sitting on a company’s board, even when he is its largest shareholder, although he does so when there is no other option. In fact, he recently made a bad investment in a company, and the media reported that Buffett had lost 30,000 million dollars. Warren replied that not everything was lost: he would run the company himself and keep his shares in it, so that over time he would increase its value again.
And that is Warren Buffett, the master of masters in the world of investing. For those who rely on charts when analyzing a stock and trying to work out whether it is in a bull or bear market, Warren has something to tell you:
The dumbest reason to buy a stock is that its price is going up.
Further reading
