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Finance Dictionary and Glossary of Investment Terms
Chairman of Berkshire Hathaway, and arguably the greatest stock market investor of all time. An investor who chose to invest $10,000 in Berkshire Hathaway when Buffett took over in 1965, would have more than $20 million today. Buffett provides strong evidence that it is possible to consistently outperform the market. His forte is in identifying undervalued companies, and he is well-known for taking a very long-term positions in companies he identifies as being good investment prospects. Warren Buffett's style of analyzing companies is solidly based in looking at fundamentals. He thinks of his investment as buying a piece of a business, not just shares of its stock. He also believes that diversification is less necessary for those able to confidently choose a select number of stocks they are confident will significantly outperform the market. Buffett determines the value of a business by totaling the net cash flows he expects to occur over the life of the company and discounting them by the appropriate interest rate. He may add a premium based on the risk involved in the particular investment. He focuses on return on equity, operating margins, debt levels and capital expenditures to identify the best investments.