- In his early days, Warren Buffett didn’t rely solely on financials and public listings to pick winning stocks.
- He spent weeks counting railroad cars, going to see “Mary Poppins” and testing the American Express brand.
- “Buffett’s Early Investments” outlines how the investor vetted his boss and found stocks to buy.
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The conventional wisdom is that Warren Buffett made his big bucks as a young investor by combing through huge stock lists and snapping up the cheapest stocks. But a new book suggests that he put in much more effort to understand what he was buying before jumping in.
In “Buffett’s Early Investing: A New Examination of Warren Buffett’s Best-Paid Decades,” author Brett Gardner details several examples of the Oracle of Omaha’s dogged pursuit of information.
The future billionaire and CEO of Berkshire Hathaway skipped classes to attend annual meetings and paid others to ask questions on his behalf. He traveled across the United States to meet with company executives and probe their personal finances, habits, and motivations.
In a 2010 interview, Buffett biographer Alice Schroeder also discussed Buffett’s methods: “He acts like an investigative journalist. It was all a gamble for him to flip through the Moody’s Manual and pick stocks, but he didn’t stop there.”
Here are six of the most striking examples of Buffett’s disciplined approach.
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Before investing in Disney in 1966, Buffett met Walt Disney and was shown around Disneyland. Company Plan.
Buffett also went to a New York City theater to watch Disney’s latest blockbuster movie to gauge long-term value.
“I’m heading off to see Mary Poppins at 2 p.m. with my briefcase,” he says. It was once said A class of college students. “It felt like I had to rent a kid.”
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Before investing in American Express in 1964, Buffett assessed whether the company’s salad oil scandal had damaged its reputation. brand.
“Buffett began stopping off at Omaha restaurants and visiting stores that accepted American Express cards and Travelers checks,” Schroeder writes in “The Snowball: The Business of Warren Buffett and the Business of Life.”
He also asked a friendly stockbroker to thoroughly research the business, producing a voluminous body of research on American Express’ bank tellers, executives, restaurants, hotels, and credit card holders. This research satisfied Buffett that business was booming and that customers still trusted the company’s product.
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Buffett He told Forbes magazine In 1965, “he spent nearly a month counting tank cars in the Kansas City railroad yards.” The investor was researching Studebaker and wanted to gauge demand for STP, a gasoline additive sold by a subsidiary of the automaker.
He knew where Studebaker got its key ingredient for STP and how much was needed to make one can. Counting railroad cars showed that STP production was increasing, so he jumped on the stock.
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Buffett, who was a graduate student I took the train One Saturday morning in 1951, he traveled from New York City to Washington, only to arrive at the Geico offices to find the door locked.
He kept knocking on the door until a bewildered manager let him in and directed him to the only person he saw in the building: Lorimer Davidson, the insurance company’s future CEO.
Buffett seized the opportunity and peppered Davidson with questions about insurance for four hours, and the answers confirmed he’d found a winner. He went on to invest about two-thirds of his net worth in the stock, which was bought outright by Berkshire Hathaway in 1996.
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In the mid-1950s, Buffett sent a partner out to track down National American Fire Insurance stock held by farmers throughout Omaha.
“He would drive around the state in his red and white Chevrolet, visiting county courthouses and banks in rural areas and casually asking who owned National American stock,” Schroeder writes in his book about Buffett’s associates.
“He would sit on his front porch, drink iced tea and eat pie with farmers and their wives, offering them cash in exchange for stock certificates.”
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Buffett took a different tack when he sought stock in the Union Street Railroad in 1954. The company was taking out ads in local newspapers to buy back its stock, but Buffett instead took out his own ads encouraging shareholders to sell, Schroeder writes.
He also once woke up at around 4 a.m. on a weekend to drive to New Bedford, Massachusetts, to meet his boss.
Buffett is known for investing based on fundamentals like a company’s cash flow and price-to-earnings ratios, but Gardner’s example shows he goes far beyond finance to be persistent and creative in his information gathering and stock hunting.