[Building Berkshire Hathaway]
Warren Buffett is a man who needs no introduction that he is the patron saint of investment for almost anyone who has obstructed the taking of shares. He is respected by many because he did some extraordinary work: he became one of the richest people, surviving on an innovative technology or the legacy of billions, but winning over the stock market for over half a century have had. Warren Buffett's huge fortune is the world's largest group: Berkshire Hathaway. But Buffett's debut was more modest.
He was born in Omaha in 1930, just as The Depression was killing the Depression. The stock market crashed half a year ago and Nebraska was particularly tough before that. The state's economy was dependent on agriculture and the collapsing prices of crops devastated many communities.
Buffett himself was fortunate to be born into the family of local stockbroker Howard Buffett. Warren's father was a smart businessman, despite the accident he was able to provide for his family. Once the economy began to recover, Howard's career deteriorated so much that he ran for Congress in 1942 because the Republican Party won the election, despite the popularity of FDR and Democrats. In the midst of his rise in politics, Howard took the Buffett family to Washington DC, where Warren naturally felt very lonely. He spent his days in school, and in his father's studies investing in mathematics to read books. It is the early years that gave rise to the ambition of becoming rich, and in fact, he would tell his friends at the school Theif that he was not a millionaire by the time he was thirty, he could hold the highest position. To that end, Warren had started playing in the cattle market before finishing high school, bought just a couple of shares here, and see how it went. But Warren's aspirations were not limited to the stock market; one of the books he read inspired him to try almost every businessman. He would buy a six-pack of Coca-Cola and sell it to his fellow students in a markup.
His first real job came in 1944 when he started the Washington Post around him. That year, 14-year-old Warren Buffett made his first tax return, deducting $ 45 for his bicycle and watch. With the money distributed to newspapers, he would purchase pinball machines, which he would then store in stores around the neighborhood. But in 1948 Howard Buffett left the re-election trail and the family was forced to return to Omaha. Warren sold his pinball business in Washington DC for a little over a thousand dollars, and back home in Nebraska, he used that money on a 4.9-acre farm, which he then rented out. Warren used the farm's rent to pay his way to the University of Nebraska, where he received a bachelor's degree in business administration.
He applied to Harvard Business School when he was 19 but was rejected, so he went with the next best option: Columbia School. There they met a teacher who would change their lifestyle forever:, that man, Benjamin Graham, would go down in history as a grand-value investment.
The two met in 1949, the same year that Graham unpublished his Magnum Opus: The Intelligent Investor. In this book, Graham took a step-by-step step on how to invest successfully and consistently without any guesswork. In short, his approach was decentering bargain prices, essentially finding a $ 1 stock that was trading at 50 cents. Buffett fell in love with the method and quickly became one of Graham's favorite students. A few years after graduation, Warren moved to work for Graham at his investment company. There, Warren would master the art of security analysis, learning that the true value of a company is simply by looking at its numbers. But, just two years later, Graham decided to shut down his company and leave Buffett on his own. Now Buffett had saved $ 175,000 at the time, which he used to start a partnership where he could implement Graham's method.
They started looking for companies that were cigarette butts: not doing great, but still had not been properly evaluated by the market or underarm words. Here's an example: In 1958 Buffett focused on the Sanborn Map Company, which placed a virtual monopoly on the production of detailed maps in the insurance business. The company had been in place for nearly a century, and while it had been deteriorating for the past decade, Buffett saw something interesting in his books: the company had been investing its profits in more than 40 different stocks for the past 20 years was. Buffett did the math and discovered that the company's stock was trading at around $ 45 per share, just $ 65 worth of the investment portfolio. So Buffett naturally began buying Senseborn stocks until he held the majority of the voting power, at which time he liquidated the investment portfolio. Effectively, they spent $ 45 to buy $ 65 and in the intervening years, they returned 45% with almost no risk.
Warren's initial investment followed These philosophies and unsurprisingly he outpaced the stock market by a factor of four.
Thus, in January 1962, at the age of 32, Varenhad officially became a millionaire, only two years after that he promised to jump into the official building. The same year Warren encountered a cigarette but that caught his eye: a struggling textile company called Berkshire Hathaway. The textile industry in New England was uncertain for decades and Berkshire closed 9 of its 11 textile mills. The stock itself was trading at around $ 7 but had assets of at least $ 11. But here's one thing: The company's CEO AT was using the time the company used to earn whatever cash it had to buy back its stock. Thus, whenever Berkshire sells to each other, it will offer to buy the shares of its investors, essentially one milling company at a time. Warren bought a lot of stock at $ 7 and the CEO then waited for the offer to buy him back. A few years later, the two slammed a one-off price: $ 11.50 per share, but when the day arrived, the proposed price was only $ 11.375. The CEO tried to outbid Buffett by 13 cents, and to return the favor Warren bought the entire company and fired it. But now Warren was the master of a decline, who had no way of getting rid of him. Instead of letting Berkshire ruin, Warren began investing in shares through the company, but this bad experience dramatically changed his philosophy.
Instead of searching for cigarette butts, he is a mediocre company at a low price, he started looking for amazing companies in prices. His first purchase using this new Philosophy American Express, a company whose stock he still owns to this day. Buffett applied his analytical skills to find the best stocks in the entire market, but the only part of the reason he became successful. What allowed him to make astronomical was his entry into the insurance business. This may sound like an odd statement, later insurance is very boring and you would not expect to double your money every year. But Warren saw the path to this business for the ultimate wealthy, which is why in 1967 he started buying insurance companies, beginning with national indemnity and ending in 1996 with GEICO.
Here's how Buffett fell in love with insurance companies: essentially like banks. Thousands of people regularly pay off their insurance system, effectively giving the insurance company a huge cash balance, but people "withdraw" their deposits when something bad happens, for example when in their home Down or their car breaks down. In other words, Buffett was buying the companies one billion dollars in cash, which was technically considered an obligation and thus not a reduction in the purchase price. Suddenly he had access to immense capitalists, investing wisely and carefully in A-grade companies. By 1983, Berkshire had a portfolio of one billion dollars, and three years later Buffett himself was worth one billion.
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