Warrent Buffet by Robert Heller

Topics: Stock, Stock market, Berkshire Hathaway Pages: 11 (3641 words) Published: February 24, 2013
Warren Buffett
Business Masterminds

By Robert Heller


• All his investments were channeled through Berkshire Hathaway. • Buffett snubbed high-tech super growth stars and bough massive stakes in ordinary shares in long-established giants like AMEX, Coca Cola and Gillette • Never invest unless you can find something worth buying • He is interested only in realities and is free from any illusions • Common sense and consistent rationality win the day even in irrational markets

• He always looked for businesses whose intrinsic value was greater than the stock price • Anyone who invested $10,000 in Berkshire Hathaway in 1965 would now be worth $51 million • Warren Buffett is worth $40 billion – almost all of it is invested in Berkshire Hathaway • Berkshire also owns General Re, America’s largest re-insurance company which cost $22 billion in 1998 • Buffett’s unique success as an investor has depended on others not following his ideas • Berkshire had a net worth of $57.4 billion in May 1999 • Buffett almost always purchases in cash and not in stocks (save for General Re and 4.3% share in McDonalds in 1995) • Buffett prefers companies that are focused on a single powerful brand that has a dominant share in an easily understood market • 74% or Berkshire’s assets consist of shares in other companies • Buffett presides over $82 billion in wholly owned operating companies which employ no less than 47, 566 workers • Insurance investments bring in $14 billion, home furnishings $793 million, flight services $850 million and Scott Fetzer (everything from vacuum cleaners to encyclopedias) $1 billion • Most conglomerates have subtracted rather than added to the value of their subsidiaries • Buffett is striving to build a company that will outlast him: a portfolio for stock market investments would not serve that purpose

Chapter 1

• Buffett maintains that market values diverge often markedly, from the intrinsic value of a business which represents real and lasting worth of its economic attributes • Buffett looks at companies that have a history of stability as well as above-average performance • It is simply more probable that a company with a good history will remain good than a bad company, based on historical record • “Choose a few stocks that are likely to produce above-average returns over the long haul, concentrate the bulk of your investments in those stocks, and have the fortitude to hold steady during any short-term market gyrations”. • Fund managers use a shot-gun approach rather than a rifle approach – buying a variety of stocks to spread the risk • Buffett beliefs that rationality rules in all matters, including how you identify an outstanding company. He applies 3 non-financial crieteria: o It is simple and understandable

o It has a consistent operating history
o It has favorable long-term prospects
• If you cannot understand the business, you cannot make a rational judgment of its investment value – why go into a situation where one arm is tied behind your back? • Buffett bets on probabilities and on the long-term

• The company must also enjoy a management that follows three requirements: o It must be rational
o It must be candid with shareholders
o It must resist the irrational tendency of corporate leaders to imitate other managements’ practices and policies, irrespective of their stability or sense • Buffett watches indicators that specifically relate to managerial excellence: o Return on equity (not earnings per share)

o Owner earnings
o Profit margins
o ROI profits (which must create at least $1 of market value for every dollar reinvested) • This narrows the list of possible investment opportunities considerably, given the above criteria and that you must understand...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • robert Essay
  • Warren Buffet Case Solution Essay
  • Warren E Buffet, 2005 Essay
  • Robert Frost Essay
  • Warren Buffet Essay
  • Heller Essay
  • Warren Buffet, 2005 Case Study Essay
  • Ian Heller Essay

Become a StudyMode Member

Sign Up - It's Free