Of Permanent Value | Andrew Kilpatrick

Summary of: Of Permanent Value: The Story of Warren Buffett, Updated and Expanded Edition
By: Andrew Kilpatrick

Introduction

Delve into the remarkable life and wisdom of Warren Buffett, one of the world’s most successful investors, in this fascinating summary of ‘Of Permanent Value: The Story of Warren Buffett’. Get a glimpse of Buffett’s humble beginnings, his innate talent for finance and investing, and his unwavering dedication to rationality and simplicity. Witness his journey from peddling Coca-Cola as a child, to forming the Buffett Partnership, which would ultimately evolve into the powerhouse known as Berkshire Hathaway. Discover the principles and strategies that catapulted Buffett into becoming a multi-billionaire and learn valuable lessons that can transform your own approach to business and investing.

The Making of Warren Buffett

Warren Buffett’s journey to becoming one of the wealthiest investors in the world began during his childhood. He was fascinated with money and finance from an early age and showed a knack for making astute investments, including his first at the age of 11. Buffett never lost his down-to-earth nature, remaining humble despite his immense success. He emphasized the importance of doing your own research, not being swayed by popular opinion, and keeping your investments secret.

Warren Buffett, one of the most successful investors in the world, was born in 1930 and raised in Omaha. Despite growing up during the Great Depression, he was always fascinated by finance and money. Buffett’s father was a stock salesman, which may have contributed to his early interest in the stock market. As a child, one of his favorite toys was a metal moneychanger he wore strapped around his waist. He loved making change and was fascinated with keeping track of money, particularly when it came to compounding it.

Buffett’s first business venture was selling Coca-Cola. He came up with the idea of buying a 25-cent six-pack and selling the bottles individually for five cents each, earning a 20% return. This return rate is consistent with Buffett’s entire business career and may contribute to his current status as a multi-billionaire.

Buffett’s ability to get at the real numbers and not the supposed numbers passed along by others is still one of his greatest strengths. As a child, he retrieved discarded bottle caps from soda machines, sorted and counted them to find out which soda brand was really selling, demonstrating his instinct for auditing. Buffett was a math prodigy and began reading his father’s books about the stock market at the age of eight.

In 1942, at the age of 11, Buffett bought his first stocks – three shares of Cities Service Preferred at $38 per share. He also convinced his sister to do the same, beginning his career as an investor not just for himself, but for others. Even as a youth, Buffett’s views about the markets were more astute than those of others. He learned a critical lesson – do not be guided by what other people say, and don’t tell your fellow investors what you are doing at the time you do it.

Buffett studied at both the Wharton School of Business at the University of Pennsylvania and the University of Nebraska, graduating in 1950 at only 19. He then went to New York City to study under Ben Graham at Columbia University’s Business School. Graham taught him not to be swayed by popular opinion – “whether someone else agrees or disagrees with you does not make you right or wrong.” Buffett never forgot his mentor’s hallmark idea and reiterates that philosophy frequently.

Even as a wealthy man, Buffett remained humble and down-to-earth. He never let on what he was doing until he had to disclose it and tried to keep his investments secret until Berkshire’s annual report was published in March. He emphasized the importance of doing your own research and not being swayed by popular opinion. Buffett’s story is an inspiration for aspiring investors everywhere.

Warren Buffett’s Early Investments

In 1956, Warren Buffett formed the Buffett Partnership with seven limited partners who had no say in investment decisions. As the years passed, Buffett added investors and consistently beat the Dow. In 1962, the partnership began buying shares of a textile mill, Berkshire Hathaway, which Buffett later gained financial control of. By 1969, the partnership’s assets had grown to over $100 million. Buffett’s investment categories included undervalued stocks, securities with an arbitrage situation, and firms with large blocks of stock. Despite his success, Buffett remained rational, positive and fun-loving.

The Birth and Growth of Berkshire Hathaway

In 1969, the Buffett Partnership closed doors to spawn the birth of Berkshire Hathaway. With the help of National Indemnity and National Fire & Marine, textile operation, and Illinois National Bank and Trust, Berkshire Hathaway took flight. Buffett liquidated the partnership and distributed profits to investors with a variety of investment options. The company also acquired Blacker Printing Company and 70% shares in Gateway Underwriters. Although Berkshire Hathaway’s ‘Buy Low, Don’t Sell’ approach appears improbable, Buffett continues to advance his original partnership agendas through industry awareness and long-term competitive strength. His success in finance, economics, and management originates from a multi-dimensional approach to business. Berkshire Hathaway also introduced Class B shares allowing a new customer base, offering an affordable stock unit. Despite occasional fluctuations in stock prices, Berkshire Hathaway never had a down year for return on shareholder equity.

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