Warren Buffett needs no introduction.
The 84-year-old chairman, president and CEO of Berkshire Hathaway is perhaps America's most-admired and most-followed investor with an almost cult-like status.
This year marks the 50th anniversary of Buffett’s takeover at Berkshire Hathaway, at the time a struggling textile business that transformed into a diversified holding company and has now grown into a sprawling conglomerate.
“In its early Buffett years, Berkshire had a big task ahead: turning a tiny stash into a large and useful company,” wrote Buffett’s longtime business partner Charlie Munger in this year’s shareholder letter. “And it solved that problem by avoiding bureaucracy and relying much on one thoughtful leader for a long, long time as he kept improving and brought in more people like himself.”
After 50 years under Buffett’s reign, Berkshire Hathaway is still going strong, with more than 50 constituent companies employing 300,000 workers, and with a market cap greater than $300 billion.
Berkshire’s gain in net worth during 2014 was $18.3 billion, according to this year’s annual letter from Buffett to Berkshire Hathaway shareholders, which increased the per-share book value of both its Class A and Class B stock by 8.3%.
Over the last 50 years, per-share book value has grown from $19 to $146,186, a rate of 19.4% compounded annually. Its sought-after Class A stock, which may be the most expensive of any public U.S. company, eclipsed $200,000 per share for the first time in August 2014.
Buffett himself has amassed a personal fortune in excess of $70 billion, thanks to Berkshire Hathaway’s rising share price. According to Forbes' World's Billionaires list, Buffett is said to be the one of the richest men in the world – earning the top spot in 2008 but since dropping to the still-admirable No. 3 spot.
Buffett, often called the "Oracle of Omaha," is revered for his investment philosophies and his adherence to value investing.
“We have never invested in companies that are hell-bent on issuing shares,” Buffett wrote in the latest shareholder letter. “That behavior is one of the surest indicators of a promotion-minded management, weak accounting, a stock that is overpriced and – all too often – outright dishonesty.”
Buffett, together with Munger, built today’s Berkshire on a simple philosophy: “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices,” Buffett wrote.
Once Buffett buys, he doesn’t look back: His intention is usually to hold these securities (or companies) indefinitely.
Berkshire Hathaway's portfolio has included companies like Coca Cola, American Express and Anheuser-Busch for many years. Over the years, as he’s bought companies like See's Candies, Dairy Queen and GEICO Auto Insurance outright, he’s given them a permanent home and an escape from banks and Wall Street analysts. Berkshire offers “a permanent home, in which the company’s people and culture will be retained (though, occasionally, management changes will be needed),” Buffett wrote. “Beyond that, any business we acquire dramatically increases its financial strength and ability to grow. Its days of dealing with banks and Wall Street analysts are also forever ended.”
The dramatic effect that a permanent home at Berkshire can have on these businesses was detailed in a recent book by Lawrence Cunningham.
In the book, “Berkshire Beyond Buffett,” Cunningham talks to Jim Weber, the CEO of running-shoe company Brooks Sports, which was owned by several different companies for short periods prior to its purchase by Berkshire.
While some of the previous owners requested Weber diversify across athletic brands, others demanded he keep a narrow focus.
Buffett is a different kind of owner, though. Buffett asked Weber what he wanted to do, and then told him to “just do that.”
In an interview with Cunningham for his new book, Weber said: “In my long business career, I have never had so much autonomy and felt so accountable.”