The Growth of an American Capitalist (2)
After college, Buffett found his lifelong mentor, Benjamin Graham.
During his graduate studies, he learned superb value investing skills from Graham. This makes Buffett "different" in the investment world.
While other investors play hard to analyze the basic data of stocks, Buffett pays attention to the companies behind the stocks, analyzes more of the products of those companies and their profit models, tries to see the fresh operating conditions behind them through those numbers, and analyzes the real market value of the company.
Graham figuratively refers to value investing as "finding cigarette butts."
The goal of investment is to identify high-value companies that are undervalued by the stock market. Just like smokers always throw away cigarette butts too early, but in fact, cigarette butts always make people take two more puffs.
Buffett relied on this method to quickly discover many seriously undervalued stocks, and in just one year, the original $9800 became $120,000. He then worked under Graham for a time before returning to Omaha to set up his own investment firm.
During this period, his value investing was "tried and tested", and while others were "chasing the rise and killing", Buffett looked for companies whose actual value far exceeded the value of the stock.
In 1964, for example, a financial company called American Express was hit by a major commercial fraud scandal. Yuntong's transportation company carried a batch of oil, but it was found that only one barrel was oil and the rest was seawater.
As a result, the company faced huge fines and compensation, and eventually filed for bankruptcy. And Yuntong's business reputation has also been greatly affected, the stock price has fallen by nearly 50% in a year, and all Wall Street investors are selling wildly.
But the perceptive Buffett doesn't think so, and while eating his steak, he finds that most customers still use Amex's credit cards, and ordinary people don't seem to talk much about the Amex scandal.
He then did market research and found that services such as checks, money orders and other services were still unimpeded. He concluded that American Express remains one of the most unimpeded companies in the U.S. after an explosive scandal.
So Buffett made an unusual move, buying American Express with 40% of the company's capital when the entire Wall Street was selling American Express.
At that time, many people felt that this young man was too arrogant and dared to invest against the market. Unexpectedly, a year later, American Express stock rose back, doubling the return of the investment in a year.
By 2017, the return on this investment had exceeded 1,000%, that is, a 10-fold increase. During this period, Young Buffett completed many similar "unconventional" investment cases. In the case that many people are not optimistic, they have earned huge excess returns.
However, in 1969, the stock market in the United States began to rise wildly, the entire market climbed, people as long as they entered the stock market, they could make money in it, and the entire market was overheated, which made Buffett, who was good at finding "value depressions", at a loss.
After consideration, he simply closed the investment company and gave up the opportunity to make money in the hot market.
Sure enough, it didn't take long for the stock market to crash, a large number of companies were facing the crisis of bankruptcy, but Buffett closed the company early and retired, by which time, his wealth had reached $25 million.
This is the investment career of the young Buffett, and the magical value investment has allowed him to quickly complete the capital accumulation.
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