MONEY & INVESTING

On Nov. 3, the world may not have stopped spinning but it did slow down. In financial circles, heads turned, conversations paused and various forms of “Wows” were whispered... Not just in the U.S. but all over the world.

Warren Buffett was speaking and he was speaking loudly…. with his wallet. He announced that Berkshire Hathaway (the company created by Mr. Buffett — he is the CEO and primary shareholder) was acquiring Burlington Northern Santa Fe in a $34 billion transaction. It was an offer to buy all outstanding shares of the railroad and, if consummated, it would be the largest acquisition in Berkshire Hathaway’s history.

Everyone worldwide looks to Mr. Buffett, an extraordinary investor who some would say is unparalleled in the past 50 years. In 2008, he was ranked by Forbes as the richest person in the world with an estimated net worth of approximately $62 billion. In 2009, Mr. Buffett was the second-richest man in the U.S. with a net worth of $40 billion. But this was after he donated billions of dollars to charity.

Warren Buffet, the “Oracle of Omaha.” COURTESY PHOTO Mr. Buffett is often called the “Oracle of Omaha” and is noted for his value investing philosophy. He’s also a notable philanthropist.

What was his message beyond liking BNSF so much that he wanted to own much more than his current 22 percent?

He was betting that the U.S. and global economy will recover; that hauling by truck and air is not nearly as price and fuel efficient as rail — both now and in the foreseeable future — and that he is contributing to the welfare of the U.S. by buying the company that needed huge amounts of capital to remain competitive and meet the needs of the U.S. economy — now and in decades to come.

In a world of day trading and derivative investing, it is such a relief that the world’s second-wealthiest person likes a bricks and mortar business of sorts — at least rails and railcars — and is expressing his confidence in future decades by investing now, even with all uncertainty.

The flip side is that he generates billions of cash each year; is looking for a home for his cash; and he is not judging himself by BNSF’s performance in the next 30 days, six months or five years. Yes, you heard it, plenty of cash and plenty of time for the investment to prove itself. Now that flip side is generally not part of the investing equation available to the retail investor. Cash and time are downright luxuries. But give Mr. Buffett credit, he did not inherit those luxuries — he created them over a long period of time for his investors and himself building success upon success.

What has put him at the top? He developed an investing style and he stuck to it. He figured out what he did well and he kept doing it. Sure, there is more to it but this was a lot of it.

He is a value investor and he figured out his own values — not Wall Street’s price tags. He invests in businesses that generated cash — maybe they are net users of cash at the time of acquisition but not forever. He frequently takes a small position in the company and after he gets very comfortable with the management and the business, he buys more or all. He stays away from technology because he doesn’t understand it. He leaves management alone — he is buying a management team as much as anything else and he doesn’t tinker with that team. His wealth is unfathomable, but clearly he is not greedy. Unlike many corporate CEOs and much of Wall Street, the vehicle for creating his wealth became the exact same vehicle for creating fortunes for his co investors; he was not creating personal wealth through a ridiculous salary or option grants.

Investors and business owners are well served to read his company’s annual report (www.berkshirehathaway. com) and ponder his style. Maybe there is something to be learned… something to be applied. 

— Jeannette Rohn Showalter is a Southwest Florida-based chartered financial analyst, considered to be the highest designation for investment professionals. She can be reached at jshowaltercfa@ yahoo.com.