CH - 1 INTRODUCTION

Warren Edward Buffettis an Americanbusiness magnate, investor and philanthropist. He is widely considered the most successful investor of the 20th century. Buffett is theprimary shareholder, chairman and CEO of BERKESHIRE HATHWAY and consistently ranked among theworld's wealthiest people. He was ranked as the world's wealthiest person in 2008 and as the third wealthiest person in 2011. In 2012, American magazineTimenamed Buffett one of the most influential people in the world. Buffett is called the "Wizard of Omaha", "Oracle of Omaha",or the "Sage of Omaha and is noted for his adherence to thevalue investingphilosophy . Buffett is also a notable philanthropist, having pledged to give away 99 percent of his fortune to philanthropic causes, primarily via the Gates Foundation. On April 11, 2012, he was diagnosed withprostate cancerfor which he completed treatment in September 2012. Buffett was born in 1930 inOmaha, Buffett began his education at Rose Hill Elementary School in Omaha. In 1942, his father was elected to the first of four terms in theUnited States Congress, and after moving with his family to Washington, D.C., Warren finished elementary school, attended Alice Deal Junior High School, and graduated fromWoodrow Wilson High Schoolin 1947 Even as a child, Buffett displayed an interest in making and saving money. He went door to door selling chewing gum,Coca-Cola, or weekly magazines. For a while, he worked in his grandfather's grocery store. While still in high school he was successful in making money by delivering newspapers, selling golf balls and stamps, and detailing cars, among other means.. In 1945, in his sophomore year of high school, Buffett and a friend spent $25 to purchase a usedpinballmachine, which they placed in the localbarber shop. Within months, they owned several machines in different barber shops. Buffett entered college as a freshman in 1947 at theWharton Business Schoolof theUniversity of Pennsylvania and studied there for two year. The age of nineteen, he graduated with aBachelor of Scienceinbusiness administration. After the completion of his undergraduate studies, Buffett enrolled atColumbia Business Schoolafter learning thatBenjamin Graham andDavid Dodd, two well-knownsecurities analysts, taught there. He earned aMaster of Scienceineconomicsfrom Columbia in 1951.

CH-2 MAIN DISCUSSIONS

In 1957, Buffett had three partnerships operating the entire year. He purchased a five-bedroom stucco house inOmaha. In 1958 the Buffett's third child,Peter Andrew Buffett, was born. Buffett operated five partnerships the entire year. In 1959, the company grew to six partnerships operating the entire year and Buffett was introduced toCharlie Munger. By 1960, Buffett had seven partnerships operating: Buffett Associates, Buffett Fund, Dacee, Emdee, Glenoff, Mo-Buff and Underwood. He asked one of his partners, a doctor, to find ten other doctors willing to invest $10,000 each in his partnership. Eventually eleven agreed, and Buffett pooled their money with a mere $100 original investment of his own. In 1961, Buffett revealed thatSanborn Map Companyaccounted for 35% of the partnership's assets. In 1962, Buffett became a millionaire because of his partnerships, which in January 1962 had an excess of $7,178,500, of which over $1,025,000 belonged to Buffett. Buffett merged all partnerships into one partnership. Buffett invested in and eventually took control of a textile manufacturing firm,Berkshire Hathaway. In 1962, Warren Buffett began buying shares in Berkshire fromSeabury Stanton. Buffett's partnerships began purchasing shares at $7.60 per share. In 1965, when Buffett's partnerships began purchasing Berkshire aggressively, they paid $14.86 per share while the company hadworking capitalof $19 per share. In 1966, Buffett closed the partnership to new money. He would go on to claim that the textile business had been his worst trade.He then moved the business into the insurance sector, and in 1985 the last of the mills that had been the core business of Berkshire Hathaway was sold. In 1967, Berkshire paid out its first and only dividend of 10 cents. In 1969, following his most successful year, Buffett liquidated the partnership and transferred their assets to his partners. Among the assets paid out were shares of Berkshire Hathaway. In 1970, as chairman of Berkshire Hathaway, Buffett began writing his now-famous annual letters to shareholders. However, he lived solely on his salary of $50,000 per year, and his outside investment income. In 1979, Berkshire began the year trading at $775 per share, and ended at $1,310. Buffett's net worth reached $620million, placing him on theForbes 400for the first time. In 1973, Berkshire began to acquire stock in theWashington Post Company In 1974, the SEC opened a formal investigation into Warren Buffett and Berkshire's acquisition of WESCO, due to possible conflict of interest. No charges were brought. In 1977, Berkshire indirectly purchased theBuffalo Evening Newsfor $32.5million. In 1979, Berkshire began to acquire stock in ABC.Capital Cities announced $3.5billion purchase of ABC on March 18, 1985 surprised the media industry, as ABC was four times bigger than Capital Cities at the time.Berkshire Hathawaychairman Warren Buffett helped finance the deal in return for a 25% stake in the combined company. In 1987, Berkshire Hathaway purchased a 12% stake in Salomon Inc., making it the largest shareholder and Buffett the director. In 1990, a scandal involvingJohn Gutfreund surfaced. Arogue trader,Paul Mozer, was submitting bids in excess of what was allowed by the Treasury rules. When this was discovered and brought to the attention of Gutfreund, he did not immediately suspend the rogue trader. Gutfreund left the company in August 1991. Buffett became Chairman of Salomon until the crisis passed on September 4, 1991, he testified before Congress. Buffett became a billionaire on paper when Berkshire Hathaway began selling class A shares on May 29, 1990, when the market closed at $7,175 a share.] In 1998, in an unusual move, he acquiredGeneral Re for stock. In 2002, Buffett became involved withMaurice R. GreenbergatAIG, with General Re providingreinsurance. On March 15, 2005, AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism fromEliot Spitzer. On February 9, 2006, AIG and the New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1.6billion. In 2010, the federal government settled with Berkshire Hathaway for $92million in return for the firm avoiding prosecution in an AIG fraud scheme, and undergoing 'corporate governance concessions'.

2.1. EARLY LIFE AND CAREER

Warren Buffett graduated from theUniversityofNebraskain 1950 with a Bachelor of Science degree. After reading "The Intelligent Investor" by Benjamin Graham, he wanted to study under Graham, and did so atColumbiaUniversity, obtaining his Master of Science Degree in business in 1951.

He then returned toOmahaand formed the investment firm of Buffett-Falk & Company, and worked as an investment salesman from 1951 to 1954. During this time, Buffett developed a close relationship with Graham, who was generous with his time and thoughts.

This interaction between the former professor and student eventually landed Buffett a job with Graham'sNew Yorkfirm, Graham-Newman Corporation, where he worked as asecurity analystfrom 1954 to 1956

Wanting to work independently, Buffett returned home once again toOmahaand started a family investment partnership at age 25 with a starting capital base of $100,000. From 1956 to 1969, when the Buffett partnership was dissolved, investors, including Buffett, experienced a thirty-fold gain in their value per share. Prior to the final decision to liquidate the partnership, Buffett had acquired the unprofitable Berkshire Hathaway textile company inNew Bedford,Massachusetts, in 1965.

After acquiringBerkshire, Buffett effected a successful turnaround of the company, which focused on changing the company's financial framework.

Berkshirekept its textile business, even in the face of mounting pressures, but also used the company as aholding companyfor Other investments.

It was in the 1973-74 market collapse that Berkshire got the opportunity to purchase other companies at bargain prices. Buffett went on a buying spree, which included an investment inTheWashingtonPost.

2.2. PERSONAL LIFE

Buffett marriedSusan Buffett in 1952. They had three children Susie, Howard and peter.

The couple began living separately in 1977, although they remained married until her death in July 2004. Their daughter, Susie, lives in Omaha and does charitable work through the Susan A.

Buffett Foundation and is a national board member ofGirls, Inc.In 2006, on his seventy-sixth birthday, Warren married his longtime companion, Astrid Menks, who was then 60 years old.

She had lived with him since his wife's departure to San Francisco in 1977.

It was Susan Buffett who arranged for the two to meet before she left Omaha to pursue her singing career. All three were close and Christmas cards to friends were signed "Warren, Susie and Astrid".

Susan Buffett briefly discussed this relationship in an interview on theCharlie Rose Showshortly before her death, in a rare glimpse into Buffett's personal life.

Warren Buffett disowned his son Peter's adopted daughter, Nicole,

In 2006 after she participated in the Jamie Johnson documentary,The One Percent.Although his first wife had referred to Nicole as one of her "adored grandchildren"

Buffett wrote her a letter stating, "I have not emotionally or legally adopted you as a grandchild, nor have the rest of my family adopted you as a niece or a cousin.

His 2006 annual salary was about $100,000, which is small compared to seniorexecutive remunerationin comparable companies. In 2007 and 2008, he earned a total compensation of $175,000, which included a base salary of just $100,00.He lives in the same house in the centralDundeeneighborhood of Omaha that he bought in 1958 for $31,500, today valued at around $700,000 In 1989, after having spent nearly $6.7million of Berkshire's funds on aprivate jet, Buffett sheepishly named it "The Indefensible". This act was a break from his past condemnation of extravagant purchases by other CEOs and his history of using more public transportation. Warren Buffett worked with Christopher Webber on an animated series with ChiefAndy Heyward, ofDiC Entertainment, and thenA Squared Entertainment. The series features Buffett and Munger, and teaches children healthy financial habits for life.Buffett was raisedPresbyterianbut has since described himself asagnostic. In December 2006 it was reported that Buffett does not carry a cell phone, does not have a computer at his desk, and drives his own automobile,aCadillac DTS.Buffett reads five newspapers every day, beginning with theOmaha World Herald, which his company bought in 2011.

2.3. BUSINESS CAREER Warren Buffett was employed from 195154 atBuffett-Falk & Co.,Omahaas an investment salesman, from 19541956 atGraham-Newman Corp., New York as a securities analyst, from 19561969 atBuffett Partnership, Ltd., Omaha as a general partner and from 1970 Present atBerkshire Hathaway Inc, Omaha as itsChairman, CEO. In 1950, at the age of 20, Buffett had made and saved $9,800 (nearly $94,000inflation adjusted for the 2012USD.In April 1952, Buffett discoveredGrahamwas on the board ofGEICOinsurance. Taking a train to Washington, D.C. on a Saturday, he knocked on the door of GEICO's headquarters until a janitor allowed him in. There he met Lorimer Davidson, Geico's Vice President, and the two discussed the insurance business for hours. Davidson would eventually become Buffett's lifelong friend and a lasting influenceand later recall that he found Buffett to be an "extraordinary man" after only fifteen minutes. Buffett graduated from Columbia and wanted to work onWall Street, however, both his father and Ben Graham urged him not to. He offered to work for Graham for free, but Graham refused Buffett returned to Omaha and worked as a stockbroker while taking aDale Carnegiepublic speaking course.Using what he learned, he felt confident enough to teach an "Investment Principles" night class at theUniversity of Nebraska-Omaha. The average age of his students was more than twice his own. During this time he also purchased a Sinclair Texaco gas station as a side investment. However, this did not turn out to be a successful business venture. In 1952Buffett marriedSusan Thompsonat Dundee Presbyterian Church and the next year they had their first child,Susan Alice Buffett. In 1954, Buffett accepted a job atBenjamin Graham's partnership. His starting salary was $12,000 a year (approximately $105,000inflation adjustedfor the 2012USD. There he worked closely withWalter Schloss Graham was a tough man to work for. He was adamant that stocks provide a wide margin of safety after weighting the trade-off between their price and their intrinsic value. The argument made sense to Buffett but he questioned whether the criteria were too stringent and caused the company to miss out on big winners that had more qualitative values. That same year the Buffetts had their second child,Howard Graham Buffett. In 1956, Benjamin Graham retired and closed his partnership. At this time Buffett's personal savings were over $174,000 ($1.47millioninflation adjusted to 2012USD and he started Buffett Partnership Ltd., an investment partnership in Omaha.

Buffett and President Obama at Oval of office, July 14, 2010 In addition to other political contributions over the years, Buffett has formally endorsed and made campaign contributions toBarack Obama's presidential campaign. On July 2, 2008, Buffett attended a $28,500 per plate fundraiser for Obama's campaign in Chicago hosted by Obama's National Finance Chair,Penny Pritzkerand her husband, as well as Obama advisorValerie Jarrett.Buffett backed Obama for president, and intimated that John McCain's views onsocial justicewere so far from his own that McCain would need a "lobotomy" for Buffett to change his endorsement. During the second2008 U.S. presidential debate, candidates John McCain and Barack Obama, after being asked first by presidential debate mediatorTom Brokaw, both mentioned Buffett as a possible futureSecretary of the Treasury.Later, in the third and final presidential debate, Obama mentioned Buffett as a potential economic advisor

2.4. QUOTES

"Rule No.1 is never lose money.Rule No.2 is never forget rule number one."

"Shares are not mere pieces of paper. They represent part ownership of a business. So, when contemplating an investment, think like a prospective owner."

"All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies."

"Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it."

"If, when making a stock investment, you're not considering holding it at least ten years, don't waste more than ten minutes considering it."

2.5. VALUES & ETHICS Smart and Hard working Equality (Treat everyone equally) Achievement oriented Walking in his own path

2.6. ACHIVEMENT In 1999, Buffett was named the top money manager of the Twentieth Century ina survey by the Carson Group, ahead ofPeter LynchandJohn Templeton.In 2007, he was listed amongTime's100 Most Influential Peoplein the world. In 2011, PresidentBarack Obamaawarded him thePresidential Medal of Freedom.Most recently, Buffett, along withBill Gates, was named the most influential global thinker in Foreign Policy's 2010 report. Buffett has not, as yet, authored any books. However, his annual letters to the shareholders in Berkshire Hathaway's annual report are a suitable substitute. Back copies of these 20-page masterpieces of investing wisdom are available from 1977 through 2006 (updated annually) fromBerkshire's Website. "Buffett: The Making of an American Capitalist" by Roger Lowenstein (1996). "Warren Buffett Speaks: Wit and Wisdom from the World's Greatest Investor" (1997) "TheWarren Buffett Way" by Robert G. Hagstrom (2005)

CH-3 EVALUATION

Forget Coke. Forget McDonalds. And you can even forget the queen of talk Oprah Winfrey. That's because when it comes right down to it the best brand in the business belongs to Warren Buffett, that grandfatherly billionaire from Omaha, Nebraska. That's true now more than ever up on Wall Street, where the investing classes hang on his every word these days as they continue to come to grips with the dangers of a subprime contagion that was never contained. Of course, to the set of value investors that have been followingWarren Buffet's investment principlesfor years, all of this renewed attention probably comes as no surprise at all. There is a reason after all that he's called the Oracle of Omaha. But with the mortgage related mess now threatening to take the markets even lower, and investors of every stripe looking for a savior, Warren Buffett's billions, and his stellar reputation, may be just the answer that the markets are looking for. And while Saint Warren certainly isn't going to save the market from all of its excesses, (not even he has that much money) he may just be able to bailout the only portion of the bond insurance market that is worth saving. That alone would be likely be enough to bring the markets back from the current abyss.

Warren Buffetts investing style of discipline and value has consistently outperformed in market for decades

John Train, author of "The Money Masters"(1980), provides us with a succinct description of Buffett's investment approach: "The essence ofWarren's thinking is that the business world is divided into a tiny number of wonderful businesses well worth investing in at a price and a large number of bad or mediocre businesses that are not attractive as long-term investments. Most of the time, most businesses are not worth what they are selling for, but on rare occasions the wonderful businesses are almost given away. When that happens, buy boldly, paying no attention to current gloomy economic and stock market forecasts."

Buffett's criteria for "wonderful businesses" include, among others, the following:

They have a good return on capital without a lot of debt.

They are understandable.

They see their profits incash flow.

They have strongfranchisesand, therefore, freedom to price.

They don't take a genius to run.

Theirearningsare predictable.

The management is owner-oriented.

CH-4 LEARNING

4.1. Things we can learn from Warren Buffett

Identify and nurture your competitive advantage.Buffett is famous for finding businesses with a competitive moat to allow them runway to grow fast for a long time and protect them from competition.

Building and motivating your team is a top priority.

Buffett clearly takes the time to get to know his team well and views the prospects for his various businesses as a function of the strength of these managers. The current breed of top entrepreneurs in technology, regardless of focus area, all seem to echo this sentiment build a top quality team and great things can happen. Successful public companies like Google, and private ones like Palantir, are well known for their incredibly selective screening processes, and the correlation between great people and value creation is clear.

Measure your performance consistently and dont be afraid to admit mistakes. Buffett starts this years letter with a bunch of good news, but he quickly offers counter-examples and mistakes. He exclaims that his purchase of bonds in a Texas utility a few years earlier was a big mistake where he committed a major unforced error. He also tells us that he was dead wrong when he predicted a year earlier that a housing recovery was set to begin.

Its human nature to sugar coat mistakes, but like Buffett, the best entrepreneurs are quick to point out challenges and decisively address them.

Play the long game and stick to your vision, even if its out of style.Buffett reminds us that the key to his success has been to focus on investments in productive assets, those companies that can grow without the need for significant additional capital. These companies efficiently deliver goods and services that are consistently in demand, through good times and bad.

Great entrepreneurs dont look for validation from the outside world too often; rather they trust their own instincts and dont stray from their ultimate vision.

4.2. 10 financial lessons we can learn from warren buffet

1. Spend wisely2. No one cares about your money as much as u do3. Do your home work- Scan thousands of stocks4. overcome your fear of risk5. focus on the long term6. invest in quality business7. hunt for exceptional bargains for solid companies8. make decision to invest based on how well money is used by company management9. be patient wait until everything is in your favor to interest10. Sell losing stocks when the market is up; buy winning stock during a crash.

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