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[FOUNTAIN]Dominated by outsiders

Published: 21 Feb. 2006, 21:54

Even in the investment world, there are different levels. Wall Street is full of investment experts. But the master of all is, of course, Warren Buffet. The U.S. economic magazine Forbes asked 4,000 people who knew the most about money, and 44 percent of them chose Mr. Buffet. Bill Gates came in eighth, even with enough money to buy a decent lunch for everyone on the planet.
Mr. Buffet has earned an average of 28 percent annually for 50 years for his investors since he founded an investment partnership in 1956. The $140,000 he initially invested has mounted to $44 billion. That is an astonishing achievement, but money is not the only reason he is regarded as the master of investors. Mr. Buffet was different from investors who were only after the money. He picked good stocks and held them for a long time.
Mr. Buffet’s investment philosophy, “long-term value investment,” comes from long real-world experience. At the age of five, he sold gum in front of his house. He was only 11 years old when he first purchased stocks. He bought three shares at $38, but their value dropped to $27 right after he bought them. But when the stock price rose, he sold and made a profit of $5 per share. But not long after he sold, the shares rose in value to $200 each. That, Mr. Buffet said, was when he learned the lesson of long-term investments. Remembering that experience, Buffet did not sell a single share of Berkshire Hathaway, which he bought at $19 each at 1965. Now, the stock value is 4,700 times that price ― about $90,000 each.
Most people envy Mr. Buffet’s success but tend to overlook his strong saving habits and simple life. He still lives in the house he bought in 1958 for $31,500. Only a couple of bedrooms and a racquet court have been added over the years.
Called the “oracle of Omaha,” Mr. Buffet strictly distinguishes speculators from investors. If people show an interest in a company’s future, he is an investor. If he is interested only in the stock value, he is a speculator. He admits that speculators can make money, but he treats them as poor relations who can never become masters.
The typical “corporate raider” of Wall Street, Carl Icahn, is nothing like Mr. Buffet. Recently, Mr. Icahn became famous in Korea for buying KT&G stocks and interfering with its management. He looks for companies with weak management that can be changed to make more money. Mr. Icahn has no interest in the company, but only in the stock value, making him a speculator in Mr. Buffet’s eyes. This is the current status of Korean companies, totally controlled by these unskilled people.

by Yi Jung-jae

The writer is a deputy business news editor at the JoongAng Ilbo.