Warren Buffett, popularly known as the “Oracle of Omaha,” has changed the way we invest. Since taking control of Berkshire Hathaway in 1965, he’s had an enormous influence on how people invest across the globe. Once a major textile producer, Berkshire Hathaway wasn’t the perfect investment from the get-go. Buffett himself has said that his foray into the textile business was likely the worst investment he ever made. Fast forward to the decades, and indeed he made the company into a multinational global conglomerate with an incredibly successful and complex portfolio of investments.
Buffett’s rare gift as an investor has produced extraordinary monetary returns. On paper, combined, his shares are worth more than $100 billion more than what he paid for them originally. By the time he started selling Berkshire Hathaway’s shares, their value had increased to over $174 billion. As he prepares to step down as chief executive at the end of this year, Buffett reflects on his journey and the lessons learned along the way.
Early Challenges and Learning Experiences
So when Warren Buffett first came to run Berkshire Hathaway, he inherited an absolutely terrible financial situation. The textile mills bled money for many years, and despite his best efforts, Buffett eventually shut down the operation in 1985. This decision proved to be a major inflection point in his career. It challenged him to prioritize investments that had the potential to provide greater returns.
While the Bloomington setback took a toll, Buffett’s investment strategy continued to transform in radical new ways. His business partner, Charlie Munger’s, effect on him was important. He began to understand the value of purchasing excellent businesses at fair prices. This strategy enormously buffered Berkshire Hathaway against economic downturns. That single move completely remade the company, turning the once-faltering cotton textile manufacturer into a global force in industries as diverse as entertainment and aerospace.
In tandem with his investments, throughout his career, Buffett has recognized some of his greatest mistakes as the investments that he didn’t make. He has notoriously called missing the opportunity to buy 100 million shares of Walmart one of those regrets. Had he actually done so, those shares would be worth almost $10 billion today. This acceptance is a reminder of why it’s important to be proactive and opportunistic in the quickly evolving investment landscape.
Milestones and Strategic Acquisitions
Buffett’s most notable achievements as an investor include several strategic acquisitions that have significantly contributed to Berkshire Hathaway’s success. The most defining moment of all may have been his 1972 acquisition of See’s Candy for $25 million. This acquisition would permanently alter his investment philosophy. It taught him that the best businesses, those with true and lasting competitive advantages, could produce stellar returns.
Pretax earnings through 2011 for Berkshire on See’s Candy are nothing short of amazing at $1.65 billion pretax. This highly profitable investment is a case study in how Buffett’s approach of finding and buying the best companies often produces the most profitable results. Berkshire’s insurance division has produced a float worth $173 billion as of the end of Q1. This enormous war chest allowed Buffett and Munger to take an active role in chasing down future acquisitions—such as Wesco Financial and Precision Castparts.
Yet Buffett’s willingness and ability to learn and change how he invested had been crucial to his long-term success. He began purchasing shares at $7 and $8 dollars a share starting in 1962. Now, those shares have enjoyed a meteoric increase in value, rising to $809,350 per share! This astounding number only goes to show how Buffett’s value investment philosophy has yielded great results throughout the decades.
The Legacy of a Visionary Investor
Berkshire Hathaway chief executive Warren Buffett is preparing to pass the baton. His legacy as one of the most successful and respected investors in history is rightfully secure, strong, and unaffected. His own story started as a failing textile producer. Today, he runs one of the largest conglomerates in the world, inspiring millions of investors across the world. Through strategic decisions and lessons learned from mistakes, Buffett has shaped an investment philosophy centered on understanding business fundamentals and recognizing true value.
Buffett’s mantra is about much more than the pursuit of profits. It reinforces the necessity of choosing smartly about where to do our investing. His lessons learned double as a cautionary tale to prospective investors about the need to remain ever vigilant in the public markets.
