Birthday wishes to Warren Buffett, who won with strategies of Benjamin Graham

Metro India News | Hyderabad 

Warren Buffett turns 96 today. He  added more strategies to value investing which he learnt from Benjamin Graham, it is interesting to see which strategies stood out and been adding more value.   It was in his 25th year he started Buffett Partnership pooling $100 as his own investment and $100,000 from 7 investors. Unlike others who charge a fee on the value of the funds managed by them, Buffett charged only success fee. The structure involved 100% returns to investors up to 6%, and on the returns above that, 75% to investors and 25% to Buffett.

He offered ‘Highwater Mark’ feature as per which any deficit below 6% gets carried forward and until the deficit is recovered, Buffett will not get any fee. When stocks trade far below their intrinsic value, Buffett invests to take advantage of their fundamental strength. Among many, striking example was his investment in 1964 in American Express when due to a temporary inventory issue, the stock declined 50% despite brand image and revenues remained intact. Other investments are Washington Post in 1973, GEICO in 1976, Coca Cola in 1989, and Apple in 2020s. GEICO’s promising returns made Buffett to later own 100% of it.

Buffett made activist investments into companies run inefficiently despite having valuable assets. Upon investing, he influences the management or liquidate the assets or restructure the business from which Buffett earns huge gains. Acquiring Berkshire Hathaway was the major example of his activist investment. Buffett started his investment journey investing in undervalued stocks, by adopting the principles from Benjamin Grahim, his mentor and father of value investing. 

Later, Buffett and Charlie realized that value investing is not optimal and they added more strategies. However, of the 3 strategies, 90% is from value investment and 5% each from activist and arbitrage investment strategies. The improvisation of value investing towards growth stocks was key in the journey of $1.1 trillion valued Berkshire Hathaway. In year 1993, Berkshire lost $3.5 billion in Dexter Shoe Co. In 2008, it lost $2 billion in ConocoPhillips, lost $1.5 billion in Energy Future Holdings and Tesco in 2014. Between 2022 to 2025, it lost $ 5 billion in Paramount Global and Kraft Heinz.

Buffett, Charlie and Berkshire learnt the lesson to note deviate from fundamentals despite technical strengths and market hypes may be otherwise. Being world's largest investment and holding company, having $1 trillion plus market cap and withstanding many economic cycles, Berkshire is the testimony of great results from their rich experience. Every learning is valuable at any age even for an investment legend like Warren Buffett from whom the world has been learning several things related to investment and capital creation. Wishing Warren Buffett a longer life and many more successful investments.

-Kishore Nuthalaplati

(The author is serving as the CFO of BEKEM Infra Projects Pvt Ltd, Hyderabad.)