Buffett, the legend

Considering the number of books I’ve read on, and the multitude more that are available, on Warren Buffett I thought he is worth a post on this obscure kid’s blog.

This is a man born in Omaha, the son of a simple (yet highly ethical) stockbroker, and later right-wing congressman. From a very young age he was obsessed with business (much the same as me), and he purchased his first stock at age 11. Many years after that first investment, and quite importantly after taking classes under Benjamin Graham, he began his first limited partnership. He had 7 partners, raising $108,000 between them, and Warren added in $100 of his own capital, for good measure. Warren’s worst year in his early investment days was a 7% gain, while the Dow lost ground.

He also simply stepped out of the market in the “Go-Go” period in the 1960s. While everyone was trading like madmen, with wall street hitting 13 million shares traded in one day at its peak, he simply retired his funds. This is key to Warren’s success, he knows exactly what his ideal market is, and he sticks to it for the big returns. His caution also paid off, with the Dow dropping from edging the 1000 bar to below 800 in the space of a few weeks (late 1960s).

After that drop is when he began making big money..he is the second richest man in the world today, worth $52 billion (trailing Bill Gates by a mere $4 billion.) Considering his fortune was made entirely on the stock market, his achievements are immense.

Considering Warren’s success, one would think any investor would make him a priority case study, but it seems most are only interested in the speculative wall street brokers’ advice, paying attention to the stocks and not the businesses behind them. Warren’s focus is on exactly that, the business behind the stock, and that is where I am concentrating my efforts. Understanding the economics behind a business is no mean feat, but the rewards of making the right (business perspective) choice can be great. I’m not interested in the stock’s day-to-day trading price, but in the return on equity, and whether this is growing. I’ll pay no attention to the Broker’s excited phone call, but only to the business and how its consumer monopoly operates.

This lies core in Grahamian style investing. Warren has added his own touch also, providing more answers as to what a stock’s intrinsic value is, and what to do with it once that value has been reached.

Next on the list of books to read is the 1950 edition of “The Intelligent Investor” by Benjamin Graham. I’ll read this and attempt to apply Warren’s expanded theories, seeing where they can be applied in order to achieve greater profits.

Seems as though my blog has taken a turn for the corporate world of late, hope noone is disappointed.
Eric

University results

For those of you who haven’t read the “about us” section, I’m an engineering student at the University of Cape Town, SA. I received my first year results this week, and here they are:

African Studies:: 60%
Technical Drawing:: 71%
Computer Science (Java programming):: 90%
MATLAB:: 96% (Class medal)
Mathematics:: 95%
Physics:: 92%
Engineering1 (power+electronics):: 100% (equaling class medal)