Walter Schloss

One of the best pieces of advice on investing I ever read came from Walter Schloss: you never really know a stock until you own it.

I thought about that when I saw this article (by way of VInvesting) about the New York Society of Security Analysts paying tribute to Schloss in celebration of his 90th birthday:

During its 47-year lifetime, Walter J. Schloss Associates generated in excess of 20% gross annualized returns and netted to its partners more than 15% per year, while the S&P 500 gained slightly more than 10%. An investor with $100,000 in the S&P 500 from January 1, 1956, to December 31, 2002, would have made $9.3 million. That same $100,000 invested in the Schloss partnership would have generated over $78 million.

“I worked for Benjamin Graham for 9 1/2 years, and Ben said he was going to retire and move to California,” began Schloss. “I had to get another job, so one of the people who was a stockholder of Graham Newman came to me and said, ‘Walter, if you start a fund, I will put some money in it.’ We ended up with $100,000. The structure was that I would not get paid unless we realized gains. The kind of stocks I bought were not growth stocks. Graham was really value-oriented. In those days he would buy stocks that were selling below working capital. There were less of them, but they were still around.

This is a wonderful article and I encourage you to read it all. But let me highlight this from Schloss, because what he says can be used by individual investors:

“I’m not very good at judging people. So I found that it was much better to look at the figures rather than people. I didn’t go to many meetings unless they were relatively nearby. I like the idea of company-paid dividends, because I think it makes management a little more aware of stockholders, but we didn’t really talk about it, because we were small. I think if you were big, if you were a Fidelity, you wanted to go out and talk to management. They’d listen to you. I think it’s really easier to use numbers when you’re small."

Comments

[Moon]

Nice article, thanks.

"Value investing seems to be made up of people who are willing to look at the facts and make judgments on them, and not willing to take advantage of others."

I stumbled over that quote. Couldn't it be said that value investing is indeed taking advantage of others' misperceptions of facts and misjudgments thereof, i.e. to recognize value where others do not? I suppose that is quite different from taking advantage of others personally, and perhaps that is what the quote means.

[John]

Moon: I think you're right in that the article doesn't mean taking advantage of other people, but taking advantage of opportunities presented by the market.

[vlado]

An updated link to Walter Schloss's article:

http://www.nyssa.org/AM/PrinterTemplate.cfm?Section=Home1&Template=/CM/HTMLDisplay.cfm&ContentID=6255

[John]

vlado: Many thanks!