Ms. Mayuri Patel 

[SYMBA]
mayuripatel_mba@yahoo.co.in

Mr. Rafique Memon
[SYMBA]
rafiquememan@yahoo.com

Warm and fuzzy aren't words normally used to describe captains of industry. That is unless you're talking about Warren Buffett –The Making of an American Capitalist. He's the second-richest man on the planet, the best investor ever.

He was born in Nebraska, Omaha, USA on the 30th of August in 1930. He was born to Leila and Howard Buffett and was the second of three children, he being the only boy. His father, Howard was a stockbroker and also became a member of the Congress. He began his study at the Wharton School of Finance at the University of Pennsylvania, but shifted to the University of Nebraska where he graduated. He then went on to Columbia University to do his Masters in economics.

He showed early signs of being entrepreneurial by being involved in various business dealings as a child, including purchasing bottles of cola cheaply and selling them for a profit. As a boy, irrespective of his family background, he delivered newspapers to make extra money and this probably sparked his interest in the media where he has made several successful investments including the Washington Post Company, a stock that has made him a lot of money and which he vows never to sell.

At the age of 11 years when we people think of games and fun he made his first investment and this was his first move in the stock market. At the University of Columbia he met the influential value investor Benjamin Graham. He was very influenced by Benjamin Graham. He tried to get a position with Graham’s firm and was at first unsuccessful. But he never lost hope and made an effort to enter into the firm and he succeeded in it. After entering in Graham-Newman he developed many of his stock market investing skills that have now become legendary.

He returned to Omaha and began a limited investing fund partnership with a group of friends, family and associates. The "Buffett Partnerships Ltd" fund racked up amazing returns for its investors over a ten year period, with returns 10 times higher than the Dow Jones Industrial average for the same time.

Buffett, after several years, decided to wind up the partnership, returning the lucky investors their capital and their share of the profits, and bought a stake in Berkshire Hathaway - a textile company. His early days at Berkshire Hathaway were not great. The company was in an industry facing real challenges from exports and high manufacturing costs. He had not, however, forgotten what he had learned under Graham, and arranged for the company to buy out two Nebraska insurance companies.

This was the start of his interest in insurance and the rise to financial fame of both himself and Berkshire Hathaway. The insurance game is a hard one but under him, the company had become not only a successful share investor, but a leading provider of insurance. The insurance industry was the first major area of success that Berkshire Hathaway had, with the funds used to acquire carefully selected investments each year. Major undervalued companies that he took advantage of included "American Express", "Coca-Cola" "The Washington Post" and "Gillette". Berkshire Hathaway owns large holdings of each of the above major brand companies (more than 5% each).

Management style
Buffett views himself as a capital allocator above anything else. His primary responsibility is to allocate capital to businesses with good economics and keep their existing management to lead the company. When he acquired a controlling interest in a business, he made clear to the owner the following:

• He will not interfere with the running of the company.

• He will be responsible for hiring and setting the compensation of the top executive.

• His hands-off approach has held strong appeal and created room for his managers to perform as owners and ultimate decision makers of their businesses. This acquisition strategy enabled him to buy companies at fair prices because the sellers wanted room to operate independently after selling.

Besides his skills in managing Berkshire's cash flow, he is skilled in managing the company's balance sheet. Since taking over Berkshire Hathaway, he has weighed every decision against its impact on the balance sheet. He has succeeded in building Berkshire into one of the eight companies (as of 2005) that are still rated by Moody's as AAA, the highest credit rating achievable and thus with the lowest cost of debt. 

Investment Approach:
Buffett was of the belief that as long as the market undervalued the stocks relative to their intrinsic value he was making a solid investment. He reasoned that the market will eventually realize it has undervalued the company and will correct its course regardless of what type of business the company was in. In addition he believes that the business has to have solid economics behind it. He does not hurry to invest in businesses with indiscernible value. He will wait for market corrections or downturns to buy solid businesses at reasonable prices, since stock-market downturns present buying opportunities.

Buffett is known for being conservative when speculation is rampant in the market and being aggressive when others fear for their capital. This contrarian strategy is what led Buffett's company through the Internet boom and bust without significant damage, although critics have also noted that it may have led Berkshire to miss out on potential opportunities during the same period.

Warren Buffett's Five Secrets of Success:

• Know your strengths and weaknesses; admit your likes and dislikes.

• Don't take yourself too seriously. But take what you do—especially for your stakeholders—very seriously.

• Treat money as a tool, not a ticket to immortality.

• Focus on the fundamentals. Practice them with the ruthless discipline of a master.

• Make friends with the media. Dance to their tune and let them crown you belle of the ball.

Social Responsibility:
He is a generous philanthropist and was giving more than $USD12 million each year to the Buffett Foundation (now called the "Susan Thompson Buffett Foundation"). His largest charitable donation was to be upon his death when he had planned to give 99% of his massive fortune to the foundation. In June 2006,  he announced plans to give much of his wealth away while he is still living. The majority of the Buffett billions will go to the foundation of his Bridge partner and friend of fifteen years, Bills Gates and his Bill & Melinda Gates Foundation.

So this is Warren Buffett who inspires all of us to dream higher and to work hard to achieve them.

We end this very short write up on Warren Buffett by quoting some of his immortal lines as follows, “You only have to do a very few things right in your life so long as you don't do too many things wrong.”

References:

• http://www.frugalmarketing.com/dtb/warren-buffett.shtml

• http://en.wikipedia.org/wiki/Warren_Buffett#References

• Lowe, Janet C. [1997] Warren Buffett Speaks : wit and wisdom from the world's greatest investor, John Wiley & Sons, Inc., pp. 164-166 (ISBN 0-471-16996-X).

• Warren Buffett Talks Business, The University of North Carolina Center for Public Television, Chapel Hill, 1995 (modified later by Buffett letter to author), p. 192.

• Warren Buffett - The Pragmatist, Esquire, June 1988, p. 159.