lunes, 1 de agosto de 2011

History of Warren Buffett

Warren Buffett
Warren Edward Buffett was born on August 30, 1930 his father, Howard, a stockbroker who became a congressman. The only male was the second of three children, and shows an amazing aptitude for money and business at a very early age. Known was his uncanny ability to calculate columns of numbers at the top of the head - a feat Warren still surprises today with your business colleagues.

In just six years, Buffett purchased 6-packs of Coca Cola from his grandfather's store for twenty-five cents and resold each bottle for a nickel, pocketing a profit of five cents. While other kids his age were playing hopscotch and jacks, Warren was making money. Five years later, Buffett took his step into the world of high finance. At eleven years old, bought three shares of Cities Service Preferred at $ 38 per share for both himself and his older sister, Doris. Shortly after buying the shares fell to just over $ 27 per share. A frightened but resilient Warren held his shares until they rebounded to $ 40. He immediately sold them - a mistake that would soon come to regret. Cities Service shot up to $ 200. The experience taught him the basic lessons of investing: patience is a virtue.

Warren Buffett Education

In 1947, a seventeen year old Warren Buffett graduated from high school. He never intended to go to college, had already made $ 5,000 delivering newspapers (this equals $ 42,610.81 in 2000). His father had other plans, and urged his son to attend the Wharton School at the University of Pennsylvania. Buffett stayed two years, complaining that he knew more than their teachers. When Howard was defeated in the 1948 Congressional race, Warren returned to Omaha and transferred to the University of Nebraska-Lincoln. I work full time, he managed to graduate in just three years.

Warren Buffett approached graduate studies with the same resistance that was some years before. He was finally persuaded to apply to Harvard Business School, which, in the worst admission decision in history, rejected him for being "too young". Despised, Warren applied to Columbia, where investors known as Ben Graham and David Dodd taught - an experience that would forever change his life.

Ben Graham - Buffett's Mentor

Ben Graham had become famous during the 1920's. At a time when the world was coming to the field of investment as a giant game of roulette, found the actions were so cheap that they were almost completely devoid of risk. One of their calls are known North pipe, an oil transportation company managed by the Rockefeller family. The action was trading at $ 65 per share, but after studying the balance sheet, Graham realized that the company had bond holdings worth $ 95 for each action. The value investor tried to convince management to sell the portfolio, but they refused. Shortly thereafter, he waged a proxy war and secured a place in the Board of Directors. The company sold its bonds and paid a dividend amounting to $ 70 per share.

When I was 40 years, Ben Graham published Security Analysis, one of the greatest works ever written on the stock market. At that time, it was risky, investing in equities had become a joke (the Dow Jones fell 381.17 to 41.22 over three to four short years after the crisis of 1929). It was at this time that Graham came up with the principle of "intrinsic" value of business - a measure of the actual value of a company that was completely and totally independent of the stock price. Using intrinsic value, investors could decide what a company worth and make investment decisions accordingly. His next book, The Intelligent Investor, which Warren celebrates as "the best book ever written on investment," introduced the world to Mr. Market - the best investment analogy in history.

Through its investment principles simple, yet profound, Ben Graham became an idyllic figure to Warren Buffett. Reading an old edition of Who's Who, Warren discovers that his mentor was the president of a small business, insurance stranger named GEICO. He took a train to Washington DC on a Saturday morning to find the venue. When he got there the doors were closed. Could not be stopped, Buffett relentlessly knocked on the door until a janitor came to open. He asked if there was anyone in the building. As luck (or fate) would have it there. It had a man working on the sixth floor. Warren was escorted to her and immediately began asking questions about the company and its business practices, a conversation that lasted four hours. The man was none other than Lorimer Davidson, the Vice President of Finance. The experience would be something that stayed with Buffett for the rest of his life. Over time the company acquired the entire GEICO through his company, Berkshire Hathaway

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