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Case Study: Warren Buffet
Matt Olbrantz
ENGM 5550
2/08/2011
Interim Assignment #2-Case Study; Warren Buffett
It was apparent at a young age that Buffett was destined for success. His parents, grandparents
knew he was a gifted as a child and eventually would turn into something great. He had
something that no one else had, a savvy for business ethics and profit. It is incredible to me that
by the time Buffett finished high school he had $6,000 in savings. And even more incredible to
have almost $10,000 by the time he got out of college. Buffett took what he learned as a young
boy about selling everyday items like gum and used the same philosophy in making billions in
the stock market .
As a young boy shades of brilliance were apparent, selling lemonade, bubble gum, then the
purchase of pin ball machines for use in barber shops and then selling them for a profit. Buffett
began trading stocks at a young age with success. It was obvious Buffett knew what he was
doing as an adolescent and I think this set the foundation’s for his strategies later in life. It also
shows that he would not invest something he was not familiar with. Who is not familiar with
gum, lemonade and pin ball as a kid??
Warren Buffett was first exposed to formal training in investing at Columbia University, where
Buffett studied under Prof. Ben Graham. Graham developed a method that identified
undervalued stocks and this was Buffett’s cornerstone approach of what is now called “valued
investing ”. From 1962 up through the 80’s Buffett really made his mark on the financial
institutions across the US. In 1965 Buffett took a risk with Berkshire Hathaway, at first did not
pan out but in 1967 with the purchase of stocks in two separate companies it showed how
Buffett’s patience has paid off. In 1970 when he became CEO of Berkshire, this was the mark
that changed investing for everyone in the US for the next 40 years. A struggling textile
company in the mid 30’s and 40’s would eventually become a billion dollar conglomerate with
no one but Buffett to attribute this feat too.
Buffett’s investment strategies are nothing short of brilliant. They are taught in colleges all over
the US, and the world. Thousands of business owners have tried to mimic his leadership
attributes with few being successful. As simple as they seem on paper the ability to fulfill his
strategies is near impossible. Many books, articles and interviews have been documented about
Buffett with little success. The 4 tenets of business are why Buffett has been so successful.
Looking at each tenet really shows how brilliant yet simple the strategies are that he follows.
Business: Is the business easy to understand and have a consistent operating history? These go
hand in hand. If you don’t understand something, you either get to know it, or you stay away
from it. In Buffett’s case he would study things he already knew that would make him even more

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knowledgeable about an investment . Also, if a company has changed products over the years
the leaders may be lacking in some areas or the company does not have a good market niche.
Buffett thoroughly researched every investment to make sure that it was the wisest decision at
the time for him and his employees.
Management: This plays into the business aspect as mentioned above. Are the managers
capable? Are the mangers candid with shareholders? I think in other words, this is saying; are
they crooks and compensating everyone accordingly. Buffett is not only a genius at what he does
but he is also fair in his business practices. I also think the last management tenet “does the
management resist the institutional imperative”, basically saying, does this company follow the
rules. Buffett always played by the rules when investing, which makes him even more amazing.
Most CEO’s have an inside “tip” or used illegal practices to get where they are. With Buffet, it
was nothing but.
Financial: One of the more important factors, which I do not entirely understand. It seems with
Buffett’s rationale to focus on companies with high profit margins that indeed paid off. This out
of all the “tenets” may be the most important and influential. I think all the financial tenets work
in the long term. Patience was one of Buffett’s strongest qualities and all of these tenets take
patience to be successful. For every dollar retained, make sure the company has created at least
one dollar in market value. Buffett is not satisfied with just the minimum. I think that one for one
is not good in his eyes. He wanted, and has seen huge returns on every dollar he has retained in
every company he has owned.
Market: Buffett’s know how of how market trends and how they relate to business were genius.
He understood that the value of the business or investment, whether low or high, Buffett had a
knack of purchasing it for significantly less than it was worth. He would research sometimes for
months, but sometimes it only took him hours to make a multi-million dollar decision.
Buffet to me is the greatest investor that has ever lived. It is funny to me that for every case study
I have completed, no matter how great the investor, inventor who ever it may be, there is always
room for error. At the end of this case study the writer tries to say that “some analysts felt that
his approach to investing was too conservative”. This is absurd; Buffett did everything right for
50 years (minus the five where he didn’t really make money). This is just another reason why he
is worth $62 billion.
One of the most admirable things about Warren Buffett, despite all his wealth and success, is
how he is against employee stock options and high CEO compensation packages in the tech.
companies. Which, I have read in many different places, is one of the main reason why he did
not invest in a single one. This just shows you how down to earth his thinking really is and how
fair of business man he is with his employees.
Conventional thinking would hold that it would be near impossible for Buffett to maintain his
record of 28% annual growth in shareholder wealth. I read an article where Buffett stated “a fat
wallet is the enemy of superior investment results”. Buffett departed from conventional thinking,
by using the rate of return on the long-term U.S. Treasury bond to discount cash flows.

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Case Study: Warren Buffet Matt Olbrantz ENGM 5550 2/08/2011 Interim Assignment #2-Case Study; Warren Buffett It was apparent at a young age that Buffett was destined for success. His parents, grandparents knew he was a gifted as a child and eventually would turn into something great. He had something that no one else had, a savvy for business ethics and profit. It is incredible to me that by the time Buffett finished high school he had $6,000 in savings. And even more incredible to have almost $10,000 by the time he got out of college. Buffett took what he learned as a young boy about selling everyday items like gum and used the same philosophy in making billions in the stock market. As a young boy shades of brilliance were apparent, selling lemonade, bubble gum, then the purchase of pin ball machines for use in barber shops and then selling them for a profit. Buffett began tra ...
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