How Warren Buffett changed the way investors think about investing

The idea of 'value investing' had long existed. But no one did it as successfully or for as long as he did, write Michael de la Merced, Maureen Farrell and Lauren Hirsch from London and New York

- 

Warren Buffett's approach to investing is deceptively simple.

"Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices," he once wrote to shareholders of Berkshire Hathaway, his business conglomerate.

This method — known as value investing — had existed long before Mr Buffett, now 94, began his career. But no one did it as well — or for as long — as he did. And in the process, he influenced generations of financiers, including Wall Street hedge fund moguls, and promoted the now-common advice about investing for the long term.

Over the 60 years that Mr Buffett has controlled Berkshire Hathaway, he used value investing to turn a failing textile manufacturer into a $1.1 trillion conglomerate, corporate takeover machine and microcosm of the US economy. One of America's largest railroads? Owned by Berkshire. The biggest shareholder in American Express and Coca-Cola? Berkshire, too.

Mr Buffett amassed a Midas-like personal fortune, valued at about $168 billion, and along the way became the avuncular avatar of American-style capitalism who was called upon for help by both corporate executives and government officials in the 2008 financial crisis.

That unparalleled success earned Mr Buffett millions of admirers around the world. Tens of thousands of them were on hand at Berkshire's annual meeting in Omaha on Saturday when he declared he finally planned to step down as chief executive.

His announcement was greeted with surprise and then minutes of thundering applause from shareholders — many of whom became millionaires by owning Berkshire stock and hang onto his every financial aphorism.

"I tell people everything I know about investing I learned from Warren Buffett," Bill Ackman, the billionaire hedge fund manager who was in the crowd, said in an interview after Mr Buffett's announcement.