Warren Buffett Basics

You may have heard Warren Buffett’s name lots of times, such as when lists of the world’s richest people come out, but if you’re not familiar with who he is, you’re missing out. For starters, he didn’t inherit his great wealth. Instead, he grew fascinated by the stock market during his Omaha, Nebraska, childhood. He bought his first shares of stock at age 11, bought a 40-acre farm while still in high school and had earned more than $5,000 from delivering newspapers and other activities by graduation. Today Buffett heads up Berkshire Hathaway, a company he built with his partner, Charlie Munger. Berkshire is a collection of many companies that Buffett bought in their entirety, such as Dairy Queen, GEICO, Fruit of the Loom, Benjamin Moore, See’s Candies, NetJets, Pampered Chef, Duracell, Berkshire Hathaway HomeServices of America (real estate brokerages), Clayton Homes, Justin Boots, Precision Castparts, McLane trucking and the massive BNSF railroad. Berkshire also owns big chunks of stock in some other companies. As of the middle of 2017, for example, Berkshire Hathaway owned sizable portions of Wells Fargo, Kraft Heinz, Coca-Cola, American Express, USG and American Airlines, among many others, plus a lot of stock in other companies such as Apple and Bank of America. Many pay dividends to Berkshire regularly. So how has Buffett done? Well, Berkshire Hathaway stock has averaged annual gains of 20.8 percent between 1965 and 2016 and is now worth more than $460 billion (nearly half a trillion dollars!). Buffett is leaving most of his own tens of billions to charity, and with Bill and Melinda Gates, has been getting many other billionaires to pledge to do the same. Fortunately for us, Warren Buffett is not just a great investor, but also a great teacher, offering insights on how to be a successful investor in his educational (and entertaining) annual letters to shareholders. You can read them at berkshirehathaway.com, and read about his amazing life in Roger Lowenstein’s terrific biography, “Buffett: The Making of an American Capitalist” (Random House, $19).