Success Story - Warren Buffett

Berkshire Hathaway
Chairman

Warren Buffett's determination and creativity have made him who he is now: chairman of a long-term investment company with more than $2 billion in holdings.

As a child, Buffett was already ambitious. As an enthusiastic and industrious carrier for The Washington Post he tried to cover more than one route simultaneously. He also made money by collecting and selling lost golf balls. Buffett's interest in finance was clear extremely early in life. He started playing the stock market with one of his sisters when he was 11. At 12, he was betting on horses, and by high school he had started a business (pinball machines) with a friend, which earned him $50 a week. Not only did he own a business by graduation, but he also had bought himself 40 acres of Nebraska farmland with his profit.

Buffett truly caught the investment bug as a senior at the University of Nebraska, when he read Benjamin Graham's The Intelligent Investor. The bible of the so-called value investors, Graham's book advised investors to hunt for stocks that trade far below their actual value, "cigar butts" -- companies the stock market had discarded but that still had a few "puffs" of value left in them.

The challenge appealed to Buffett's mathematical skills. After graduating, Buffett was rejected from Harvard Business School, so he moved to New York to study with Graham at Columbia University. After earning a master's in economics, he began working for his mentor.

Feeling constrained by Graham's strict philosophy, Buffett wondered if it made more sense to buy good businesses at a fair price than dying businesses on-the-cheap. In 1957 he returned to Omaha and started his first investment partnership. A group of Omaha investors handed him $25,000 each. Buffett put in $100 of his own, appointed himself general partner and began buying stocks. His goal: beat the Dow Jones Industrial Average by an average of 10 percent a year. When the partnership dissolved in 1969, Buffett's investments had ballooned at a compound rate of 29.5 percent, compared to just 7.4 percent for the Dow.
I
n 1962, Buffett began buying stock in a struggling New Bedford, Mass., textile mill called Berkshire Hathaway. With a price of less than $8 a share, Berkshire was a classic cigar butt, but with more than a few good puffs left. As the U.S. textile industry withered against foreign competition, Buffett redeployed Berkshire's capital into an array of other businesses, including insurance.