Warren Buffett

Arguably the best-known investor on the planet. Buffett is known for the world-class returns he has produced for over 30 years from his investment conglomerate, Berkshire Hathaway, and for his witty and insightful chairman's letter in Berkshire's annual report. Adding in the investment record of Buffett's partnership, which he ran from 1956 to 1968 before sinking his capital into Berkshire, then his record from 1956 to 2001 showed an annual compound growth rate of 24.5%, enough to turn $1,000 into $i9m. Over the same period, the pre-tax return from the S&P 500 index was 10.1% a year.

Buffett is characterised as an exponent of value investing and he learned his trade from Benjamin Graham, who first espoused that particular cause. In many respects, however, Buffett's investment style is far removed from Graham's. It focuses on the "business franchise", the idea that there is a small cadre of exceptional businesses whose advantages mean that they are protected from everyday economics. Brand-name corporations, or those which can grow on the back of bigger corporations - "gross royalty businesses" such as advertising agencies - are good examples.

Bargain issue

The Holy Grail for followers of value investing. The term has a general meaning indicating good value in an ordinary share. However, through the writing of Benjamin Graham, it also has a specific meaning which was successfully applied by Graham and continues to be used by orthodox value investors, although usually with some modifications. These allow for the fact that stock markets are now generally more highly valued than when Graham was working from the 1930s to the 1970s.

The specific meaning of a bargain issue is when a company's ordinary shares sell in the market for less than the per share book value of current assets after deducting all other claims on the business. In other words, take a company's current assets (inventories, debtors, cash) and deduct not only the current liabilities (creditors, short-term borrowings) but also the long-term borrowings and any other allowances. The net result is that the shares of such companies sell for less than the value of net current assets with any fixed assets thrown in for nothing. Graham found that buying a selection of such shares across a variety of industries invariably produced good investment returns.