Warren Buffett
Last but by no means least is Warren Buffett. Buffett is chairman of United States investment company Berkshire Hathaway, which he gained control of in 1965. His investment return of more than 20% a year since then has made him one of the world’s richest men with a personal fortune of around $US43 billion.
But despite this vast wealth, Buffett has never sold a single share of Berkshire. That fact typifies his investment approach – if you find a good business, buy the shares and hold on, preferably forever, unless the story changes.
Buffett is a disciple of value investing, and was in fact a student of Benjamin Graham at Columbia University. He too believes investors should only buy shares where there is a margin of safety between the intrinsic value of the business and the share price.
Buffett has however modified Graham’s value investing approach. Graham cared only about the numbers behind the business, while Buffett believes that honest and capable management are also important ingredients when analysing companies. And while Graham would buy any business if it was cheap enough, Buffett prefers to buy quality. He has said, ‘It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price’. This principle has seen him accumulate major stakes in household names such as The Coca Cola Company and Gillette.
Buffett also differs from Graham in one other way—concentration. While Berkshire now contains a large range of different businesses and investments, Buffett has typically made fairly big investment bets. Like Fisher, his belief is that if you are confident enough in a company’s prospects you may as well buy a significant stake. Buffett is clearly the world’s most successful investor. Nobody else has come even close to matching the fortune he has accumulated over four decades.
Further Reading
- There’s so much stuff to read about Warren Buffett it’s hard to know where to start. But one of the best places is Berkshire Hathaway’s home page. Buffett’s Letters to Berkshire shareholders are a great resource and an education in themselves. And for those with the inclination, Warren Buffett: The Making of an American Capitalist is just about the best Buffett biography there is.
