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The World's Most Successful Investor
Warren Buffett is
the world's most successful investor and
a self-made billionaire. In
2005, Buffett was ranked the world's second richest man with a
personal net worth of $43 billion.
Buffett runs and owns about
31% of Berkshire Hathway, a $136 billion investment company, that has
substantial stakes in Coca Cola, Wells Fargo and American Express. A $1
investment in Berkshire in 1965 would bring about $5,500 in 2005.
Since 1951, Buffett
generated an average annual return of about 31%. The average annual return
for the Standard & Poor's 500-stock over that period is 11%.
Buffett's Teachings on Investment
Warren Buffett is the world's most
successful investor. "Buffett's teachings on investment sound deceptively
simple. But there is no deception. They truly
are
simple. Do not allow investment advisers to persuade you that investment
is a complex matter needing great expertise. Instead, learn how to assess
the fundamental and financial values of a business
yourself, and invest according to your convictions."
Ignoring Conventional Investment
Guidelines
Warren Buffett believes that
the conventional approach to investment makes it difficult to beat the
market and easy to do worse. If you wish to invest well you must be prepared
to go against the prevailing wisdom and ignore conventional investment
guidelines. You can increase your chances of finding winning stocks by
adhering to
Buffett's contrarian principles.
Be Different and Make
a Difference!
Relying On Gut Instinct
Bill Gates, Founder of
Microsoft Corporation and a Berkshire director, praises Buffett's
hard-to-imitate management style. "It's baffling to think who else could do
it," he says.
Warren Buffet spends most of
his day alone in an office with no computer. His desk isn't littered with
stock research. "I don't use analysts or fortune tellers, " Buffett says.
"If I had to pick one, I don't know which it would be." He deliberately
keeps the outside world at bay, believing it is the best way for him to
remain "rational" as an investor. If he is interested in investing in a
company, he studies the financials himself. "All I have to do is think and
not be influenced by others," he says. Warren Buffett "spends the better
part of most workdays thinking and reading. He fields a handful of phone
calls, and on most days, he confers with the chiefs of of a few Berkshire
subsidiaries. He seldom holds meetings."1
Warren Buffett's Investment Criteria
Warren Buffett was once asked what is the most
important thing he looks for when evaluating a company to invest in. Without
hesitation, he replied, "Sustainable competitive advantage"...
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Hands-Off Management
Buffett believes that
managers of the companies he is investing in ought to be left to run their
businesses without interference from him and without having to hew any to
any unifying corporate strategies or goals. "We delegate to the point of
abdication," Buffett says in Berkshire's Owner's Manual.
Yin and Yang of Employee Empowerment
Despite its investment size,
Berkshire Hathways has a tiny staff. It's headquarters is staffed by just 17
employees. The company has no public-relations, human-relations,
investor-relations, legal departments, or investment committee. It holds no
quarterly earning calls for investors and analysts, has no asset allocation
guidelines, and gives no guidance on future earnings. Warren Buffet tells
the chiefs of his business units not to produce any special reports for him.
On occasion, when severe
problems arise, Buffett abandons his hands-off management approach however.
Identifying an Outstanding Company...
The Power of Focus...
Making Fast Decisions...
Making a $800 Million Investment Decision Within One Day...
Using the Probability Theory...
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