Warren Buffett: His Life and Education
Warren Buffett: Success Story
Warren Buffett: Net Worth & Current Influence
Warren Buffett: Most Influential Quotes
Warren Buffett’s name is practically synonymous with his biggest success: Berkshire Hathaway (BRK.A). Warren became an integral part of Berkshire Hathaway in the early 1960s and helped the company expand into one of the largest conglomerates in the world. In 1956, his path to success began to accelerate when he moved back to Nebraska with his family.
Buffett's First Partnership
Before working for Benjamin Graham, Warren had been an investment salesman – a job that he liked doing, except when the stocks he suggested dropped in value and lost money for his clients. To minimize the potential of having irate clients, Warren started a partnership with his close friends and family. The partnership had unique restrictions attached to it: Warren himself would invest only $100 and, through re-invested management fees, would grow his stake in the partnership. Warren would take half of the partnership’s gains over 4% and would repay the partnership a quarter of any loss incurred. Furthermore, money could only be added or withdrawn from the partnership on December 31st, and partners would have no input about the investments in the partnership.
By 1959, Warren had opened a total of seven partnerships and had a 9.5% stake in more than a million dollars of partnership assets. Three years later, Warren was now a millionaire and merged all of his partnerships into a single entity.
Buying Berkshire Hathaway
In 1962, Warren saw an opportunity to invest in a New England textile company called Berkshire Hathaway and bought some of its stock. Warren began to aggressively buy shares after a dispute with its management convinced him that the company needed a change in leadership. Ironically, the purchase of Berkshire Hathaway is one of Warren’s major regrets. (For more, see: Always Bet On Berkshire Hathaway.)
Understanding the beauty of owning insurance companies – clients pay premiums today to possibly receive payments decades later – Warren used Berkshire Hathaway as a holding company to buy National Indemnity Company (the first of many insurance companies he would buy) and used its substantial cash flow to finance further acquisitions.
As a value investor, Warren is a sort of jack-of-all-trades when it comes to industry knowledge. Berkshire Hathaway is a great example. Buffett saw a company that was cheap and bought it, regardless of the fact that he wasn’t an expert in textile manufacturing. Gradually, Buffett shifted Berkshire’s focus away from its traditional endeavors, instead using it as a holding company to invest in other businesses. Over the decades, Warren has bought, held and sold companies in a variety of different industries.