The Intelligent Investor: Warren Buffett

If one were to think of an intelligent investor, Warren Buffett certainly comes to mind. During his 70-plus years of investing, he has had some pretty diverse experiences. That includes using his savings to buy pinball machines and setting them up in local businesses and pocketing half the profit. Pretty good for a 17-year-old!

But the story of how Buffett developed his investment acumen over the years is one more complex than the entrepreneurial adventures of a kid. At 19, he read a book by Benjamin Graham called “The Intelligent Investor” which extolled the virtues of looking for undervalued companies. He was so impressed with it that after college graduation, he applied to Columbia Univ. Business School where Mr. Graham was a professor. While there, he further studied Graham’s principles of “value investing” that he would apply to analyses of businesses during his whole career.

After graduate school, Buffett was a successful investment salesman until his early thirties, making him a millionaire. He then decided to set his sights on direct investment in companies. He used Graham’s system: identify companies that were financially sound and had a promising future but whose stock prices did not reflect their intrinsic value, and then buy and hold them for the long term.

Over time, this approach has paid off handsomely for Buffett even as he has refined those principles over the years. To this day, he still abides by the tenets of value investing by looking for companies with superior return on capital without huge debt as well as strong management, among other criteria. Warren Buffett, though a thoughtful and gifted businessman, maintains a surprisingly non-analytical perspective as revealed in this quote: “If calculus or algebra were required to be a great investor, I’d have to go back to delivering newspapers.”

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