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Warren Buffett - a successful investor in the world
Section:   eng » Successful Investors  
Warren Buffett - a successful investor in the world  Warren Buffett (Warren Buffett), to convince the majority of his colleagues - the most successful investor, who made his capital by investing in stocks. However, the word "luck" is probably not the most appropriate. In choosing sites for investment Buffett holds very fundamental analysis - he picks stocks for financial and operational performance of public companies. He buys not just shares, and a successful business that stands behind these securities. In this case, Buffett prefers those assets that, in his opinion, at the time of purchase of undervalued. Of course, Buffett's long-term investor - on average it holds stocks for 10 years. And according to him, he does not care what happens to the stock exchange after he bought them. By his own admission, good stocks, he will keep as much as they will be able to generate profits. Sell ​​them ahead of time he will not, and this may somewhat reduce the financial performance of Berkshire Hathaway (BRKA) (BRKB) - so he thinks Buffett.

 

"The main secret of successful investing - says Buffett, nicknamed the" Oracle of Omaha "for his investment instincts - to choose good stocks at the right time and keep them for as long as these shares remain good." The most famous and most often cited illustration of the success of the strategy Buffett is the fact that $ 10,000 invested in his company in 1965, now would bring about $ 30 million, the same $ 10 thousand invested in the S & P 500, now would be worth only $ 500 thousand . Buffett himself consistently ranked third in the ranking of world's richest people compiled by Forbes. His fortune is now estimated at $ 47 billion

 

Warren Edward Buffett was born August 30, 1930 in Omaha, which is in Nebraska. Father Howard Buffett (Howard Buffett) was a successful stock trader. Altogether Buffett had four children, and Warren was the only boy among them. Even as a little boy, he found remarkable memory for numbers, the first time memorizing the number of residents in various cities in America. Interestingly, the grandfather of Warren held in Omaha grocery store, which employed the current companion Buffett Charlie Munger (Charlie Munger).

 

His first young Buffett made a deal at the age of six years. The store his grandfather bought it in pocket money, six cans of "Coca-Cola" for 25 cents a piece and sold them for 50 cents to his family. The work attracted the father of Warren, and at age 11 he decided to try his hand at stock speculation. Joining together with his elder sister, Doris (Doris) and taking the money borrowed from his father, he bought three shares of Cities Service Preferred at $ 38. Soon, their price dropped to $ 27, and then rose to $ 40. At that point Warren had sold shares to lock in profits and earned net commission of $ 5. However, only a few days the price of Cities Service has exceeded $ 200 per share. Buffett still remembers that his mistake and added that since life has taught him a basic principle of investing - "patience is rewarded."

 

At 13 years young Warren took up the delivery of the Washington Post and earn $ 175 a month. Buoyed by his success, he surprised all the relatives, saying that if the age of 30 will not become a millionaire, then jump off the roof of the tallest building in Omaha. Relatives comforted with the thought that at this age grow older and wiser Warren. Their hopes were justified, but not as they imagined. Buffett has successfully overcame a 30-year mark, and earned his first million when he was 31 years old.

 

After graduating from high school in 1947, Buffett enrolled at the University of Pennsylvania in the Department of Finance. After spending two years on this faculty, Buffett moved to the University of Nebraska, where in 1950 he received a bachelor's degree. After that he moved, in fact, the main institution of his life - in the University District of Columbia, Business School. It should be mentioned that Buffett has filed an application to the business school at Harvard, but there has not been adopted. As subsequent events showed, the choice of institution has had a significant influence on future life Buffett. At Columbia University he attended a seminar by Benjamin Graham (Benjamin Graham), devoted to the analysis of securities. The final score was Buffett's "A-plus" - Graham raised this estimate for the first time his teaching career.

 

However, in the company (Graham-Newman) to work, he did not take Buffett and Warren began his official career at the firm his father as manager of sales of investment products. Interestingly, one of the first companies whose shares he recommended to buy their clients was an insurance company GEIKO - now it is one of the cornerstones of the holding company Berkshire Hathaway. With this company is connected one of those textbook stories, which usually includes a biography of virtually all significant outstanding people. Thus, a member of the board of directors GEIKO was Benjamin Graham - the same Graham who taught the course analyzes the securities at the university. Having learned this detail about the company, Buffett immediately boarded a train and traveled to Washington, where the weekend knocked on the office door GEIKO. Casually in the office just at the time was vice president of finance, with whom Buffett has talked for several hours. During this conversation, Buffett was, so to speak, "first-hand information about the principles and functioning of business insurance and risk management, which greatly helped him in the future.

 

At that time Buffett started to run their own workshop at the University of Nebraska, on the principles of investment. At that time (1951) Buffett was 21 years old and the average age of his students was twice as much. In 1954, Benjamin Graham, Buffett finally offered as an analyst in the company in which Warren worked for two years. During this period, it has grown expert in the exchange operations, and felt ready to start something big. So, in 1956, Buffett went from Washington to Omaha and founded Buffett Associates. Seven members of his family and friends paid their share in the capital, amounting to $ 105 thousand is interesting that Buffett himself has invested in a new project just $ 100. The size of his personal fortune at that time was already about $ 140 thousand, and it was insurance against failure of foreign investment money. That is why the size of a personal installment Buffett has made only $ 100. In 1958, the amount of partnership funds in the management of Buffett doubled compared with 1956. History of investment decisions Buffett goes on - or rather, to present day. And in most cases, these solutions are correct and make a profit yourself Buffett and his company's shareholders.

 

Buffett's strategy outlined in the 13 corporate governance principles formulated by them in 1983. First, Buffett sees himself and other executives of Berkshire and its shareholders are not parties to the transaction as a purchase and sale of stocks, as partners, co-investing their funds in stocks. And it's not just empty words. In his letter to shareholders Buffett once admitted that 99% of his personal wealth invested in shares of Berkshire Hathaway. His closest associate Charlie Munger (Charlie Manger) invested 90%. Shares in Berkshire Hathaway is also owned by family members of directors, their friends and acquaintances. According to Buffett, such an approach is justified because the high diversification of investments Berkshire substantially reduces their risk-taking. In addition, Buffett argues that such investment strategy emphasizes the principle of partnership directors and shareholders of the holding - if shareholders suffer losses, proportional losses are, and company director. The board of directors of Berkshire Hathaway has 11 seats. It includes, inter alia, an associate Buffett Charlie Munger (Charlie Munger) and son - Howard Buffett (Howard Buffett). In 2004, after the death of his wife Buffett, Susan (Susan Buffett), the board of directors of Berkshire Hathaway, Bill Gates came in (Bill Gates), one of the shareholders of each company and Buffett.

 

Very important principle Buffett - non-interference in the operational management of purchased companies. "Oracle of Omaha" is buying a company that seems to be an attractive and unique operational decisions, which he accepts, - assignment, or reassignment CEO and determining the size and order of his remuneration. Typically, the reward involves getting control of the share options of the company in achieving certain results. All other solutions are on the conscience of the manager. In most cases, this approach justifies itself again - in order to increase their own compensation, control and improve the company's capitalization, which is what Buffett seeks.

 

Minimizing the risk - one of the cornerstones of the strategy Buffett. By his own admission, he would rather give up an interesting acquisition, rather than going to increase the debt burden of the company. No coincidence his Berkshire Hathaway holding company is now one of only seven issuers have higher credit rating agencies, according to Moody's - Aaa. High credit rating provides Buffett a low cost of capital. Buffett believes that one of the major evils that are harmful to the modern economy is the wrong system of distribution of remuneration among financial market participants. In his opinion, a significant portion of transactions in the stock market, and is recommended for the sake of personal enrichment of mediators - the different kinds of brokers and traders. It would be reasonable to limit the number of transactions allowed for each person throughout his life. Buffett gives a figure of 10 - no more than ten transactions in the life of each of the participants in financial markets.

 

However, even Buffett makes mistakes. In 2005, he counted on the falling dollar and the amount of short positions on the dollar by year-end stood at $ 21.4 billion estimated Buffett, the dollar had to fall to $ 1.40 per euro. Instead, thanks to the campaign of tighter monetary policy the Fed, the dollar rose 14%, and foreign exchange losses of Berkshire Hathaway made $ 955 million together with Buffett, incidentally, have lost their investments are big players, like George Soros (George Soros) and Bill Gates .

 

To its credit, Buffett should say that from 2002 to the end of 2005 Berkshire Hathaway profits from foreign exchange transactions amounted to $ 2 billion the way, that in 2002, the first time in his life, he began to invest in foreign exchange, Buffett said in a letter shareholders in March 2004 to at least one shareholder of Berkshire is very surprised to learn about currency Buffett. This shareholder, Tom Russo (Tom Russo), a partner at Gardner, Russo & Gardner, attended the annual meetings of Berkshire for 15 years. According to him, every time when Buffett was asked about the dollar or foreign currency trading, the answer Buffett has always boiled down to this: "You can not make money by betting against the United States of America."

 

During the last year Buffett has reduced the volume of investments in foreign currency. This step, he compensated for the purchase of shares in foreign companies denominated in foreign currencies or American companies that receive the bulk of profits abroad. Buffett is still very pessimistic refers to the state of the U.S. current account. In addition to the foreign trade deficit, which reached a recent record levels, the balance of investment income, as predicted by Buffett, is also soon to be negative. In this case, Buffett acknowledges that the U.S. economy is able to withstand these negative consequences, but not for long. In the future, if not to solve this problem, it can become very, very painful, warns Buffett.

 

In the governance of the Berkshire Hathaway Buffett often refers to the core principle of investing, peculiar to him still at an early age - the ability to wait. In this regard, revealing his letter to shareholders of Berkshire Hathaway, published in March 2003, speaking of himself and his deputy, Vice-Chairman of the Board of Directors of Berkshire Charles Munger, Buffett wrote: "We continue to almost nothing to do with respect to the shares. Charlie and I feel more satisfaction with respect to our investments in major facilities investments Berkshire, most of which have increased their profits, while the cost performance of their stocks have improved. But we are not inclined to buy shares to existing packages. While these companies have good prospects, we are all still do not believe that their shares are undervalued. In our opinion, the same applies to the stock market as a whole. Despite a three-year drop in prices, which significantly improved the attractiveness of common stocks, we still find very few who have even a moderately interest. This sad fact is indicative of madness cost characteristics to which the shares reached during the Great Bubble [the end of the 1990's - early 2000]. Unfortunately, the hangover may prove to be proportional to the binge. Rejection of shares, which Charlie and I demonstrate in Currently, it is not an inborn. We really like to own common stocks - if they can be purchased at attractive prices ... But sometimes successful investing requires inactivity. "

 

However, in an interview with financial publication Barron's in October 2003, speaking of the mistakes made in the past, Buffett has expressed regret at not bought time shares retailer Wal-Mart Stores. He considered them overpriced. This error, according to Buffett, cost Berkshire $ 8 billion

 

Among the companies, whose shares account for the largest share in the 47-billion-dollar assets Berkshire as of December 31, 2005 - American Express, Ameriprise Financial, Coca-Cola, M & T Bank, Moody's, PetroChina, Procter & Gamble, Wal-Mart, Washington Post, Wells Fargo, White Mountains Ins .. These data are contained in the annual report for Berkshire Hathaway in 2005. By the end of 2005 Berkshire Hathaway profit rose 16.6% to $ 8.5 billion, or $ 5,538 per share. In 2004, earnings totaled $ 7.31 billion, or $ 4,753 per share. For the year was initiated by 5 deals by absorption. The carrying value of shares of Berkshire rose by 6,4%. Shares of Berkshire Hathaway were not subjected to crushing in 1941. The growth of shareholder value Berkshire Hathaway in comparison with the S & P 500 from its founding to the present.

 
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