The World’s Greatest Stock Market Investor

Warren Edward BuffettThe Oracle of Omaha (Omaha, Nebraska)

www.businessweek.com/1999/99_27/b3636001.htm
The Warren Buffett You Don’t Know
Ace stockpicker, of course–and now, an empire-builder

Warren Buffett is returning to the U.S. from Europe in a private jet. As his plane nears its destination, the flight attendant gives out landing cards and a warning to all eight passengers aboard. ”The customs inspector here is utterly humorless,” she says, ”so no wisecracks or he will tear the plane apart from fore to aft.” Buffett, who quips as reflexively as he breathes, takes his card without comment.

In the terminal, a surly looking man with a crewcut and a pistol on his hip sits behind a small table. Buffett hands over his passport and landing card to the inspector, who does not seem to realize that the professorial-looking 68-year-old standing before him is America’s second-richest man. Or perhaps he just gets a kick out of trying to take the high and mighty down a peg. ”You left some things blank,” the inspector says peevishly. ”Do you have $10,000?”

The question could have launched a dozen snappy retorts, but Buffett restrains himself. ”I have what I left with,” he says carefully. The inspector furrows his brow–was that some kind of joke?–but does not press the issue. He asks Buffett if he has any anything to declare. ”I was given two books,” Buffett says. ”Well, you have to put it down, then,” snaps the agent, who fills in the blank himself.

Buffett shows not a flicker of annoyance at being treated like a misbehaving child. He stands mute and impassive before the inspector, who, after a few more curt remarks, can think of nothing else to do but let ”the Oracle of Omaha” be on his way.

***************

Has there ever been a less pompous billionaire than Warren Edward Buffett? Hollywood might cast him in the role of an amiable teacher at a Midwestern college or a sweet-tempered, wisecracking inventor who eventually wins a Nobel prize and gets the girl besides. To hear Buffett sing his beautifully artless rendition of Ain’t She Sweet to his own ukulele accompaniment is to wonder not only how such a man came to measure his net worth in billions but also whether he might not be a time-traveler from a more innocent age.

If Buffett had a business card, it would identify him as chairman and chief executive of Berkshire Hathaway Inc. (BRK.A) But he is far better known–indeed, world-famous–as the greatest stock market investor of modern times. The figures, though often cited, still astound: Had you put $10,000 into Berkshire when Buffett bought control of it in 1965, you’d have $51 million now, vs. just $497,431 if the money were invested in the Standard & Poor’s 500-stock index.

The numbers don’t lie, but the story they tell is out of date. Buffett has not added a major position to Berkshire’s bulging stock portfolio since amassing 4.3% of McDonald’s Corp. (MCD) in 1995. In the meantime, he has transformed what long has been a sideline at Berkshire–the acquisition of entire companies–into the main event. Over the past three years, Berkshire has spent $27.3 billion to buy seven companies in industries as disparate as aviation, fast food, and home furnishings. The $22 billion purchase of reinsurer General Re Corp., which closed late last year, was Buffett’s largest ever.

The effect has been dramatic: In short order, Berkshire has been transformed from a closed-end fund in corporate drag to a bona fide operating company. At the start of 1996, the company’s famous stock portfolio accounted for fully 76% of Berkshire’s $29.9 billion in assets. But by the end of 1999’s first quarter, the figure had plummeted to 32% as assets quadrupled, to $124 billion. Today, Buffett’s company employs 47,566 workers, double the number in 1995.

And he isn’t done yet. ”I’d love to make a $10 billion to $15 billion acquisition, and we could go bigger than that if I really like the company,” says Buffett, who holds $15 billion in cash and is sitting on top of an additional $30 billion in unrealized gains in Berkshire’s stock portfolios.

It’s all there in black and white in Berkshire Hathaway’s famously literate annual reports, but somehow the company’s transformation has gone not just unheralded but unnoticed. Berkshire is ”possibly the most talked about and the least understood company in the world,” contends Alice Schroeder, a PaineWebber Inc. insurance analyst who in January published one of the few comprehensive studies of the company ever undertaken by a brokerage house.


***************

In mid-April, Buffett led a small entourage on a whirlwind European tour to promote one of Berkshire’s latest acquisitions, Executive Jet Aviation. I went along for the ride (on one of EJA’s Gulfstream IV-SP jets) and got an unusual chance to observe the notoriously press-shy Buffett at close range against a kaleidoscopic backdrop of private airports, luxury hotels, and banquet halls stretching from London to Frankfurt to Paris.

Buffett survived a demanding regimen of midmorning coffees, two-hour luncheons, 90-minute press conferences, and four-course banquets. ”I never get tired,” he told reporters in London, ”except for my voice.” Actually, Buffett was ashen with fatigue midway through the third day but soldiered gamely on, answering even the lamest questions with the same expansiveness and wit the fifth time he heard them as he did the first.

Only once did Buffett show annoyance. During a press conference at the Frankfurt airport, Richard Santulli, EJA’s normally understated chief executive, let his admiration of Buffett overflow. ”People say that he’s the most astute investor of the 20th century,” he said. ”I say ever.”

Buffett, who was sitting at Santulli’s side, gave a little snort. ”Why not?” he said sourly. ”I’m sitting right here.”

Like any mogul, Buffett has his special needs. On this trip, he indulged two of them, listed here in reverse order of importance: red meat (at lunch and dinner) and Coca-Cola (all the time).

Whenever I lost track of Buffett, Coke often appeared to guide me–a carbonated version of the proverbial trail of crumbs. In London, our party went from airport to hotel in separate cars. When I arrived at the Berkeley Hotel, I did not have to wonder for long whether Buffett had preceded me. A bellhop approached with a shopping bag. ”Is this yours?” he asked. Inside were two six-packs of Cherry Coke. Two days later, I was in the crowded lobby of the Schlosshotel Kronberg near Frankfurt, following a white-gloved waiter bearing aloft a single bottle of Coca-Cola on a silver tray.

***************

Somewhere between Frankfurt and Paris, Buffett gets up and walks back to the airplane’s pantry to fetch a box of Swiss Sprungli chocolates an admirer had given him in Germany. Buffett makes his way slowly up the aisle of the plane in his shirtsleeves, offering the candy to each passenger aboard.

A half-empty box of See’s chocolates rests on the table where I’m sitting. Buffett pops a piece in his mouth. I ask him whether he thinks he could identify See’s in a blind taste test against other brands. ”Of course,” he says. ”I can also tell Coke from Pepsi. The thing is, most Americans prefer Pepsi to Coke because it is 4% sweeter, but Coke still outsells Pepsi by a huge margin.”

As Buffett continues in this vein, he starts staring at the box of Sprungli he carries. He shifts it to one hand as if he were about to choose a piece, then seems to change his mind. ”It’s a showy sort of candy, isn’t it?” he says and then falls silent. He gazes raptly at the Sprungli for a full 45 seconds as the conversation continues around him. Then he abruptly sets the box down and returns to his seat without a word.

Later, I recount this to Chuck Huggins, See’s president, who chuckles knowingly. ”Yeah, that’s Warren. Brand-loyal.”

***************

We arrive late to Paris, touching down in a freakish, near-gale-force windstorm that both thrills and alarms our pilot. In four cars, we race as fast as rush-hour Paris traffic allows from Le Bourget to Dassault Aviation Group’s magnificent 19th century chateau–familiarly known as Le Rond Point–on the Champs Elysees. EJA is the largest commercial customer of Dassault Aviation, Europe’s leading manufacturer of business jets. Serge Dassault, the company’s chairman, is hosting tonight’s gala reception and dinner in Buffett’s honor. By the time we arrive, the reception is in full swing. But Buffett takes a few steps into the foyer and hustles up a flight of stairs. It will be a good 35 minutes until he descends and joins the party.

Downstairs, the guest of honor’s whereabouts is Topic A among Dassault’s distinguished guests. It might puzzle them to learn that Buffett is on a transatlantic call to one of his employees. The matter he is discussing with Ajit Jain this evening is not urgent. But it is Buffett’s custom to speak with Jain every evening. If that means keeping 200 of France’s richest people waiting, then c’est la vie.

BY ANTHONY BIANCO

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