WARREN BUFFETT“THE SAGE OF OMAHA”                      AMAR RAVEENDRAN
Agenda Bio Management style Investment approach Methodology
Biography/History Bought first stock at age 11 Invested savings into farmland Had pinball machine business and  sold fo...
Biography/History            Opened his own partnership in Omaha            By 1961, he had 5 partnerships            I...
Biography/History Closed partnership in 1969 and  worth millions personally In 1974 lost over 50% of wealth In 1981 Buf...
Biography/History   Buffett worth $44 billion today   Berkshire has $248 billion in assets   CEO   Charles Munger, vic...
philanthropy 85% of wealth given to philanthropy Bill and Melinda Gates Foundation   Health and learning   $1.5 billio...
Management TenetsBuffett‟s three management tenets concern the  evaluation of management quality     Is management ration...
Rationality If a company generates high returns on equity, the  duty of management is to reinvest those earnings  back in...
Candor Buffett believes that a manager who confesses  mistakes publicly is more likely to correct them Managers who disc...
Resisting the Institutional Imperative What is the institutional imperative?     the lemming-like tendency of corporate ...
Management Style He will not interfere with the running of the  company. He will be responsible for hiring and setting t...
Some Management Tips Review annual reports from a few years back, paying  special attention to what management said then ...
What type of investor is Buffett?Value Investor What is a value investor,  and what makes Warren  “the best” ?       Amex
Buffet’s famous statements Rule No.1: Never lose money. Rule No.2:  Never forget rule No.1.” “The stock market is design...
His Portfolio
performance                                 Berkshire Hathaway’s                                 Class A shares vs. S&P 50...
Methodology1.   Has the company consistently performed well?          ROE for 5-10 years2.   Has the company avoided acce...
Methodology4.   How long has the company been public?          At least 10 years          Recent IPO is not a target5.  ...
Methodology       W. Buffett’s most important skill!!!6. Is the stock selling at 25% discount or at its real value?       ...
conclusion Complete understanding of the industry Value investing (based on fundamental analysis) Longevity (in establi...
Great Buffet Quotes:  "Someones sitting in the shade today because someone planted a  tree a long time ago."  "Wall Street...
   THAK YOU
Upcoming SlideShare
Loading in...5
×

Warren buffett

1,163

Published on

Warren Buffett

Published in: Business, Economy & Finance
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,163
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
70
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Warren buffett

  1. 1. WARREN BUFFETT“THE SAGE OF OMAHA” AMAR RAVEENDRAN
  2. 2. Agenda Bio Management style Investment approach Methodology
  3. 3. Biography/History Bought first stock at age 11 Invested savings into farmland Had pinball machine business and sold for a profit Attended Columbia University where Ben Graham was a professor at the time Worked for Ben Graham for $12,000 a year
  4. 4. Biography/History  Opened his own partnership in Omaha  By 1961, he had 5 partnerships  In 1962, he merged partnerships to make Buffett Partnerships, Ltd.  Bought stock for Berkshire Hathaway at $8  Bought Amex stock after fraud scandal  Took control of Berkshire in 1965
  5. 5. Biography/History Closed partnership in 1969 and worth millions personally In 1974 lost over 50% of wealth In 1981 Buffett and Munger create Berkshire Charitable Contribution plan Crash of „87 lost $342 million personally
  6. 6. Biography/History Buffett worth $44 billion today Berkshire has $248 billion in assets CEO Charles Munger, vice-chairman  Met in 1959 Goal to increase 15% a year
  7. 7. philanthropy 85% of wealth given to philanthropy Bill and Melinda Gates Foundation  Health and learning  $1.5 billion annually The rest to foundations run by his children and founded by late wife
  8. 8. Management TenetsBuffett‟s three management tenets concern the evaluation of management quality  Is management rational?  Is management candid?  Does management resist the institutional imperative?
  9. 9. Rationality If a company generates high returns on equity, the duty of management is to reinvest those earnings back into the company, for the benefit of shareholders If the earnings cannot be reinvested at high rates, management has three options:  ignore the problem and continue to reinvest at below-average rates  buy growth  return the money to the shareholders, who then might have a chance to reinvest the money elsewhere at higher rates In Buffett‟s mind, only one choice is rational, that is option 3
  10. 10. Candor Buffett believes that a manager who confesses mistakes publicly is more likely to correct them Managers who discusses the failures of the company with shareholders are admirable
  11. 11. Resisting the Institutional Imperative What is the institutional imperative?  the lemming-like tendency of corporate management to imitate the behavior of other managers, no matter how irrational it may be Buffett points out that thinking independently and charting a course based on rationality and logic are more likely to maximize the profits of the company than a strategy that can best be described as “follow the leader”
  12. 12. Management Style He will not interfere with the running of the company. He will be responsible for hiring and setting the compensation of the top executive. Capital allocated to the business will have a price tag (a hurdle rate) attached.
  13. 13. Some Management Tips Review annual reports from a few years back, paying special attention to what management said then about strategies for the future. Compare those plans to today‟s results: How fully were they realized? Compare the strategies of a few years ago to this year‟s strategies and ideas: How has the thinking changed? Compare the annual reports of the company you are interested in with reports from similar companies in the same industry. It is not always easy to find exact duplicates, but even relative performance comparison can yield insights
  14. 14. What type of investor is Buffett?Value Investor What is a value investor, and what makes Warren “the best” ?  Amex
  15. 15. Buffet’s famous statements Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” “The stock market is designed to transfer money from the active to the patient.” “The most important quality for an investor is temperament, not intellect.” "Risk comes from not knowing what youre doing."
  16. 16. His Portfolio
  17. 17. performance Berkshire Hathaway’s Class A shares vs. S&P 500Berkshire Hathaway’sClass A & B shares vs. S&P 500
  18. 18. Methodology1. Has the company consistently performed well?  ROE for 5-10 years2. Has the company avoided access debt?  Small amount of debt indicating that earnings growth is being generated from equity as opposed to borrowed money3. Are profit margins high? Are they increasing?  Look back at least 5 years
  19. 19. Methodology4. How long has the company been public?  At least 10 years  Recent IPO is not a target5. Do the company‟s product rely on commodity?  Characteristics must be hard to replicate – competitive advantage, or “economic moat”  Product must be distinguishable  Must not rely solely on commodity
  20. 20. Methodology W. Buffett’s most important skill!!!6. Is the stock selling at 25% discount or at its real value?  Determine intrinsic value by analyzing business fundamentals:  Include analysis of earnings, revenues and assets  Usually higher than its liquidation value  Compare company‟s intrinsic value to its current market capitalization  If intrinsic value is at least 25% higher – company has value
  21. 21. conclusion Complete understanding of the industry Value investing (based on fundamental analysis) Longevity (in established businesses, for long-term)
  22. 22. Great Buffet Quotes: "Someones sitting in the shade today because someone planted a tree a long time ago." "Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway."
  23. 23.  THAK YOU
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×