Apr 15 2011

Warren Buffet: The Oil Prospector and St Peter

Warren Buffet, the ‘sage of Omaha’, is the world’s most famous investor, and currently the world’s third richest man. He is CEO and Chair of the Investment Company Martha Hathaway. His net worth is estimated at $47 billion, and he has said he plans to give 99% of that to good causes. Despite his immense wealth, he is well known for his frugal living.

He is the archetypal exponent of ‘value investing’. He only invests in companies where he understand the business, and where it has ‘sound fundamental’.Once he has purchased good stock, he tends to stick with it. He shuns frequent trading and speculative trend based ‘technical’ investing.

“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful . . . Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So, if you wait for the robins, spring will be over”

Although there are more than 50 books in print with his name in the title, he has written none of them. As far as we know what he thinks, it is gathered from the collective annual reports he presents to the lucky shareholders of Martha Hathaway.

This is a story that Buffet says was told to him by his mentor, Ben Graham.

“Let me tell you the story of the oil prospector who met St. Peter at the Pearly Gates.

When told his occupation, St. Peter said, “Oh, I’m really sorry. You seem to meet all the tests to get into heaven. But we’ve got a terrible problem. See that pen over there? That’s where we keep the oil prospectors waiting to get into heaven. And it’s filled—we haven’t got room for even one more.”

The oil prospector thought for a minute and said, “Would you mind if I just said four words to those folks?”

“I can’t see any harm in that,” said St. Pete.

So the old-timer cupped his hands and yelled out, “Oil discovered in hell!” Immediately, the oil prospectors wrenched the lock off the door of the pen and out they flew, flapping their wings as hard as they could for the lower regions.

“You know, that’s a pretty good trick,” St. Pete said. “Move in. The place is yours. You’ve got plenty of room.”

The old fellow scratched his head and said, “No. If you don’t mind, I think I’ll go along with the rest of ’em. There may be some truth to that rumor after all.”