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040912 The Story of Warren Buffett

THE STORY OF ALEX BOSSERT

Lately, one of the first people to show up atthe Berkshire annual meeting is Alex Bossert,an 18-year-old student at Cathedral High

School in St. Cloud, Minnesota.Arriving at the site around 4:00 a.m., Bossert

makes a day of it. The meeting in 2009 was hisfourth one.“I’ve been investing since I was 10 and read my

first book about Buffett when I was 13,” he said.“When I was 13, I was at Barnes & Noble and

the first book I pulled out was How to Pick StocksLike Warren Buffett by Timothy Vick. I had no ideawho Warren Buffett was, but I read it, and itsparked my interest in investing. I had read manybooks on investing before that, but none made much sense. I’ve read every-thing I can on Warren Buffett since then.“About that time, I bought one Class B share [of Berkshire] by saving every

penny I made from summer jobs, birthday money, mowing lawns, shoveling,etc. I purchased the one share at $2,284 and still hold it today,” Bossert reveals.Bossert is known for his writings on his blog site: http://alexbossert.

blogspot.com. There he stated, “I follow the investment principles used byWarren Buffett, Ben Graham, Edward Lampert, Charlie Munger, JoelGreenblatt, and other successful investors. I attempt to learn everything I canabout investing/business in hopes of eventually starting my own investmentfund.“I started my Alex Bossert’s Thoughts on Value Investing to keep track of my

portfolio and to write about value investing-related topics,” he explains. “Iwrite a report on each company I invest in, and if I find something interestingon the Internet related to value investing, I pass it on to my readers. One of myfirst posts was an analysis of Buffett’s investment in First Industrial Realty Trustthat he made in his personal portfolio in 1999.”Bossert tracks investment ideas coming in from such investors as Seth

Klarman and Mohnish Pabrai. Regarding Klarman, Bossert wrote, “A friendsent me a video of a speech given by Seth Klarman at the Columbia BusinessSchool. Klarman’s hedge fund, the Baupost Group, has done over 20% a year

since he founded the firm in 1983 with only one down year. Also, SethKlarman’s book Margin of Safety: Risk-Averse Value Investing Strategies for theThoughtful Investor is also one of the best books I’ve read on value investing. It’scurrently out of print and selling for about $1,600, but I got a copy throughmy library’s intra-library loan program.“For my personal portfolio, I’m generally looking at small companies that are

being overlooked by large institutions. I’m trying to replicate what Buffett didback in his partnership and early days running Berkshire. Smaller companiesare many times misunderstood and overlooked and at the same time may bevery cheap. Some may trade for single-digit free cash flow or p/e yields, belowcash or significantly below book value. I just read all the annual reports I canfind, and the latest 10 Qs. I search the Internet, talk to management, which isvery easy at small companies, read what other bloggers say about the company,ask friends to research it and see what they think—just trying to get all theinformation I can. I also find it useful to look at what other value investors arebuying.… Eventually I want to run other people’s money.”

ERIC SCHLEIEN: DORM ROOM HEDGE FUND

Eric Schleien, 21, began a friendship withBossert in 2007 when they met at the YellowBRKer meeting. Schleien runs a hedge fund,ElS Capital Partners, LLC, which he startedin his room at Babson College in Wellesley,Massachusetts. He later transferred to theUniversity of Buffalo.

He said:

I’ve been interested in investing since Iwas 11 years old. I started out readinga Motley Fool book called InvestmentGuide for Teens, the teens guide to hav-ing more money than your parents (or

something like that) and as an 11 year old that was very enticing to mefor the novelty of it all. That book mentioned investors and then Iwould read about those investors. I read about Lynch, O’Neill, andthen when I read about Buffett, that’s when it really clicked. So Istarted reading more and more books about Buffett. Then they’dalways mention Graham and the Intelligent Investor … so I read someGraham and his book the Intelligent Investor as well. At the end of theday, value investing was what made the most sense to me.

THE YOUNG AND THE BRAVE

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Eric Schleien

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shares and made it to their first shareholders meeting in 2007.It would be the weekend that changed their careers (and much of their lives)

from that point forward. After hearing Buffett and Munger all day on Saturdayand meeting guys like Pabrai and Whitney Tilson among so many other likeminded value gurus, it became clear to them that running an investment part-nership was the best way to apply their passions to life. Dinsmore and McCoyare fans of and have met with former Stanford University student Tim Bliss, aninvestor who heads Investment Group of Santa Barbara. “He’s the one who gotus on track,” Dinsmore says.The initial plans for their new business were sketched out on the plane ride

home from Omaha that year. Dinsmore and McCoy planned, worked withlawyers, and convinced some supportive friends and family to trust them witha small portion of their capital. By the end of 2008, Cumbre Capital Partners LLC, of San Franscisco now,

had been formed and was ready to launch just as the U.S. economy and creditcrisis was nearing its darkest hour. Seeing the environment as the best oppor-tunity in their investment history to find bargains, they launched their fund onJanuary 1, 2009, with $340,000 under management.Cumbre Capital Partners is named after La Cumbre Peak in Santa Barbara,

California, where the fund was founded. Mostly unknown by locals despite“hiding in plain sight,” Cumbre Peak is the tallest and most impressive peak inSanta Barbara County. Cumbre Capital seeks out similar situations in the mar-ketplace—market leaders and opportunities in ignored or out-of-favor niches.Mike and Scott’s fund, which owns some Berkshire shares, was inspired by

the original Buffett Partnerships of the 1950’s and 60’s and is structured almostidentically to Buffett’s original partnership rules including charging no man-agement fee and requiring a 6% hurdle before any performance fees are chargedfor running the fund.Scott and Mike continue to attend the Berkshire meeting each year and in

2009 Scott took the liberty of using his shareholder discount to buy his girl-friend of 7 years an engagement ring at Borsheims only after receiving a letterfrom Buffett offering his advice for the purchase. Dinsmore spent about 6% ofhis net worth on the ring—in line with what Buffett has said he did and whathe suggested Bill Gates do.Cumbre Capital’s first year in business was 2009 and they could not be more

excited with the progress thus far—closing the year with a net return toinvestors of 31% and over $1.2 million under management. And even moreimportantly they are working with people they admire and respect, are doingsomething they love and have the most valuable mentors in the world in guyslike Buffett and Munger.

For my high school graduation present, I decided I wanted to go toOmaha. So me and my dad headed off to Omaha in 2006. It was awonderful experience. Being in the presence of Buffett and Mungerand listening to them speaking was just like everything I had readabout and here they were in person. I got invited to play bridge withBuffett, but unfortunately I didn’t know how to play bridge. I askedthe woman who was one of Buffett’s friends if she could teach me fortomorrow and she goes, “No its not a game I can teach you in a day soyou’re out of luck,” and then I never saw her again.

What’s a key thing in my opinion to take away from it, is my passionfor value investing came from my inspiration from BerkshireHathaway and Buffett. This is just another example of how Buffett hascreated a culture that empowers others to do this kinda stuff. AsCharlie said when they get even larger, Berkshire can create a culturethat does more than this and actually help transform humanity.

SCOTT DINSMORE AND MIKE MCCOY

Scott Dinsmore, 27, who wentto the University of CaliforniaSanta Barbara and Mike McCoy,28 (whose birthday is on thesame day, as Buffett, August 30),who went to the University ofCalifornia Davis, have beenlearning about Warren Buffettand Berkshire Hathaway for themajority of their lives. Dinsmore also studied at the

London School of Economicsand McCoy at Cambridge andthat’s where they really got toknow one another. As childhoodfriends, classmates and eventuallycolleagues, they scoured justabout every book they could findon the topic of value—Buffett,Charlie Munger, Ben Graham,Mohnish Pabrai, and JoelGreenblatt. Eventually theypicked up a couple of class B

Mike McCoy, right and Scott DinsmoreThe duo, now veteran annual meeting attendees,take in the annual meeting in 2011.

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