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Warren Buffet started investment partnerships in 1956 among his relatives and friends. He started buying stocks of Berkshire Hathaway (then a textile company) via these partnerships in 1962. By 1970, Buffet has consolidated the investment interests of his partnerships into Berkshire while dissolving his partnerships. From thereon, Berkshire was the vehicle for Buffet's investment activities.

Stock price of Berkshire in May, 1965 (when Buffet became chairman of the Executive Committee of Berkshire) was $18 a share. As of January 31, 1998, it has soared to $50,300, an average annual compounded growth rate of 27% over a span of 33 years!

THIS RECORD OF ABOVE-AVERAGE GROWTH OVER SUCH A LONG PERIOD OF TIME PROBABLY MAKES WARREN BUFFET THE WORLD'S GREATEST STOCK MARKET INVESTOR, in the process building a personal fortune in excess of eight billion dollars.

How did he do it? According to Robert G. Hagstrom, Jr., Buffet's investment principles may be classified into twelve principles (or "tenets") grouped in four categories:

• Business tenets
  • Is the business simple and understandable?
  • Does the business have a consistent operating history?
  • Does the business have favorable long-term prospects?

• Management tenets
  • Is management rational?
  • Is management candid with the shareholders?
  • Does management resist the institutional imperative?

• Financial tenets
  • Focus on return on equity, not earnings per share
  • Calculate "owner earnings" to get a true reflection of value
  • Look for companies with high orofit margins
  • For every dollar retained, make sure the company has created at least one dollar of market value

• Market tenets
  • What is the value of the business?
  • Can the business be purchased at a significant discount to its value?

These investment principles are explained in Hagstrom's book, The Warren Buffet Way-Investment Strategies of the World's Greatest Investor.

Buffet-The Making of an American Capitalist, by Roger Lowenstein, provides an excellent autobiography.

These books are INTERESTING AND EXTREMELY READABLE, even for the NON-TECHNICAL investor, available in association with AMAZON.COM, the world's biggest bookstore:

• The Warren Buffet Way-Investment Strategies of the World's Greatest Investor, by Robert G. Hagstrom, Jr.
  • Paperback
• Buffet-The Making of an American Capitalist, by Roger Lowenstein
  • Paperback
  • Audio-Cassette