Biography
American business magnate, investor and philanthropist. The most successful investor in the world. Chairman, CEO and largest stakeholder of Berkshire Hathaway.
He studied at Columbia University. Trained in investing by professor Benjamin Graham, who’s the coauthor of Security Analysis (Method of identifying undervalued stocks, P<Intrinsic Value).
Graham | Buffet | Focus on the value of assets such as: cash, net working capital and physical assets. | + Also on valuable franchises that were unrecognized by the market. |
Berkshire Hathaway
American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States.
- 1965-1995 Compound Annual Growth Rate: 24%
- May 24, 2005 Announcement of the acquisition of Pacific Corp (electric utility) by Mid American Energy Holdings Company (subsidiary).
- 2004 Portfolio of businesses included: insurance, apparel, building products, finance and financial products, flight services, retail, grocery distribution and carpet and floor coverings.
Buffet investment philosophy: 1) Economic reality not accounting reality
Long-term prospects based on the quality of management and the firm’s capacity to create value. 2) The cost of the lost opportunity
Analyzing and comparing an investment opportunity with the second alternative (the lost one). 3) Value creation: time is money
Intrinsic Value Present value of future expected performance 4) Measure performance by gain in intrinsic value, not accounting profit
Objective: to maximize average annual rate of gain in intrinsic business value on a per-share basis. 5) Risk and discount rates
CAPM | BUFFET’S WAY | Adds a risk premium to the long term risk-free rate of return
