In the world of investment, no name is larger than Warren Buffett's. Every investor dreams of imitating his remarkable rise to one of the richest men in the world. However, understanding the man and his choices are important before making choices based on his experience.
Warren Buffett, CEO
Born in 1930 in Omaha, Nebraska, Warren Buffett is widely known as one of the most successful investor in world history. After starting out by purchasing a pinball machine at age 15, he became an entrepreneur that led him to receive a masters degree in economics from Columbia University. Through a series of well-planned investments, Buffett established himself as one of the most preeminent businessmen and investors in the world. His fortune peaked at an estimated $62 billion in early 2008, at which time Forbes named him the richest person in the world.
Buffett is best known as the largest shareholder and CEO of Berkshire Hathaway, a holding company with a number of subsidiaries. The firm has shown an average of a 20.3 percent increase in value for its shareholders since 1964.
Warren Buffett is also known for is philanthropic ventures. He has promised to donate 85 percent of his wealth to charity when he dies.
Risk and Earnings with Berkshire Hathaway
One of Buffett's main investment practices is to purchase like companies and merge them through hostile takeovers or provide venture capital to help facilitate growth in a sector.
Under the umbrella of Berkshire, a large movement of acquisitions began in the early 1970s. Washington Post Company and the Buffalo Evening News. This allowed Buffett and the board of directors to force much of the competition from the newspaper market.
He then financed a deal in the mid-1980s that combined a company known as Capital Cities with the media giant ABC for a 25 percent stake in the combined business. Again, the media conglomerate took over much of the market share, especially in radio stations.
One of his most lucrative investments was a 1988 purchase of seven percent of Coca-Cola Company for $1.02 billion. Many thought this was a bad move in the midst of the Cola Wars, but this has generated Berkshire Hathaway and Warren Buffett billions over the years.
Lessons for Investors and the Business Community
During the subprime mortgage crisis, Warren Buffett continued to stay positive. During the third quarter of 2008, Berkshire Hathaway dropped 77 percent. A number of his stocks appeared to be suffering heavily from mark-to-market losses. For example, Berkshire acquired a 10 percent stake in Goldman Sachs for the cost of $123 dollars per share. Just weeks later, the shares fell to $60. He also purchased $3 billion in preferred GE stock at $22.25, which fell to $8.80 within five months.
In all, analysts estimate that Buffett lost $25 billion dollars in the second half of 2008.
However, he has again leveraged his strength in the investment world with some very large Fortune 500 companies. He facilitated a takeover of Rohm & Haas with Dow Chemical, with a $3 billion investment.
Buffett's investment choices have been great at times and unprofitable at others. However, the lesson that can be culled from his recent losses show that despite the failure of certain investments, its important to continue working with the market. According to his example, while the market can be challenging, the only way to make money from it is to continue investing.
Jason Chavis - Jason lives and works out of Minneapolis. He is the author of four books, two movies and a play as well as numerous articles for a variety ...
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