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Q&A with Arnold Van Den Berg: Ask Your Questions

10qk

gurufocus

354 followers
GuruFocus will be hosting our first interview with prominent investor Arnold Van Den Berg, president and founder of Austin-based Century Management. His firm manages approximately $2 billion.

Van Den Berg attained the outstanding achievement of having only one year of negative returns in 19 years, from 1988-2006. He is a value investor who has developed an investment philosophy that runs counter to standard market psychology. His strategy incorporates fundamental analysis of individual companies, their industries and competitors. He typically elects to invest in companies at 40% to 60% below the stock’s intrinsic value to maintain a margin of safety and seeks out historic low P/S ratios. He believes that the price paid for a company’s stock ultimately determines the rate of return, not how large or popular the company is.

When fully invested, his typical portfolio will contain 35-40 companies and will reflect his policy of broad diversification. He is extremely selective about which opportunities he chooses and will resist investing until he finds one he feels confident about.

In the first quarter of 2011, Van Den Berg reduced his positions in numerous stocks and bought only one – Cisco Systems Inc. (CSCO). Additionally, he sold out of several big-name companies: Walgreen Co. (WAG), Walt Disney Company (DIS), Verizon Communications Inc. (VZ), AT&T (T), Penney Company Inc. (JCP) and Lecg Corp. (XPRT).

Van Den Berg is also a survivor of the Nazi occupation of Holland. He was smuggled into an orphanage at the age of three and reunited three years later with his parents, who survived Auschwitz. With his diverse life experience, 35 years of investing experience and notable returns, he has much wisdom to share with GuruFocus readers.

Performance of CM Value I Composite

Year Return (%) S&P500 (%) Excess Gain (%)
2010 12.06 15.1 -3.0
2009 24.15 26.5 -2.4
2008 -33.54 -37 3.5
2007 -4.4 5.61 -10.0
2006 15.52 15.79 -0.3
5-Year Cumulative 2.1 12.2 -10.1
2005 11.54 4.91 6.6
2004 10.15 12 -1.9
2003 26.5 28.7 -2.2
2002 0.49 -22.1 22.6
2001 11.07 -11.9 23.0
10-Year Cumulative 77.1 16.4 60.7
2000 45.05 -9.1 54.1
1999 38.47 21 17.5
1998 3.31 28.6 -25.3
1997 19.28 33.4 -14.1
1996 24.18 23 1.2
15-Year Cumulative 444.4 170.2 274.2
1995 15.38 37.6 -22.2
1994 3.89 1.3 2.6
1993 11.82 10.1 1.7
1992 8.41 7.6 0.8
1991 15.27 30.5 -15.2
20-Year Cumulative 811.9 482.2 329.7
1990 -8.03 -3.1 -4.9
1989 14.43 31.7 -17.3
1988 18.44 16.6 1.8
0 0 0 0.0
0 0 0 0.0
25-Year Cumulative 1036.7 766.4 270.3


You can learn more about how Van Den Berg invests in the articles below:

http://www.gurufocus.com/news.php?id=116681

http://www.gurufocus.com/news.php?id=118813

http://www.gurufocus.com/news.php?id=77445

GuruFocus has hosted several of our gurus for dialogues with our readers, including Donald Yacktman, Joel Greenblatt, Mason Hawkins and Zeke Ashton.

To ask questions Mr. Van Den Berg your questions, post them in the User Comments area below. We will collect and send to him.

About the author:

gurufocus
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 2.8/5 (22 votes)

Comments

teidelman
Teidelman premium member - 3 years ago
Your value mandate gives you the flexibility to invest in any sector/size. In the last few years you have concentrated into high quality U.S. Multinational companies (WMT, MSFT, JNJ, etc) because that's where you saw the relative value. Unfortunately, many have underperformed their smaller/illiquid/cyclical/low quality alternatives and have gone from cheap to cheaper. Why do you think this is the case and what could be the catalyst to make them regain performance leadership?
teidelman
Teidelman premium member - 3 years ago
What are your personal favorite 1 or 2 stock ideas right now?
terencemcauley
Terencemcauley - 3 years ago


I would like to hear your thoughts on macro fundamentals particularly related to U.S. inflation and the corresponding issue of monetary tightening? Is the Fed going to tighten this year? Are fundamentals in the U.S. and the overall global economy strong enough to absorb this tightening, which has already begun in China and Europe?
gurufocus
Gurufocus premium member - 3 years ago
1. How do you define "high quality"? What factors will make you think a company has a high quality business?

2. Why are you investing heavily in technology stocks now?

3. Why Cisco?

4. You told an very interesting story about Silver crash in 1980s before. What is your view on gold and silver?

5. in 1999, you wrote "Over the next 10 years we believe that the return on the S&P will be between 2% to 7%." That was similar to the prediction of Warren Buffett in 1999. Even that turned out to be optimistic. What is your view of the the broad market valuation and the expected return of S&P in the next 10 years?

gbevans
Gbevans - 3 years ago
You have bought and sold CPI Corp several times over the last 12 year and are once again the largest shareholder. A good free cash flow business with poor reinvestment opportunities. They bought back stock for awhile and have been paying down debt more recently and have acquired PCA, Kiddie Kandids and now Bella Pictures. This has allowed them to spread their digital technology over a bigger base. Sittings are down but price per sitting is up. I would think they would eventually sell the business to a Buffett type investor who could take the cash flow and redeploy elsewhere. How do you see this playing out?
ecistat
Ecistat - 3 years ago


What are the more important metrics that you use to define value?
sersoylu
Sersoylu - 3 years ago


Can you give us a few great value stock ideas today in the small and micro cap space, and explain why you like them ?
ctolman
Ctolman - 3 years ago
Arnold,

There was a piece in OID approximately eight years ago where you discussed the post-bubble periods. It was transformative for me but I wonder where you think we are at present. It seems the risks are greater than ever as our gov't tries to solve an over-consumption problem by issuing massive amounts of debt. You can buy some very high quality companies at single digit PE's but the market generally trades higher (even if you think the reported numbers are clean enough) and profit margins are at all time highs. Many more years of effectively going nowhwere until we get significantly cheaper? Thank you.
grol1971
Grol1971 premium member - 3 years ago
As a long-time value investor, what are your main concerns for the next few years? How do you see increasing inflation affecting asset prices in general? thanks.
rjstcr
Rjstcr premium member - 3 years ago
You seem to be reducing your exposure quite a bit in the stock market. Is this because you think the market is over valued at this time? If I remember correctly you were still buying heavily in 2007 such as Talberts, YRC Worldwide, WP Stewart, etc. What do you see different to make you go more to cash at this point compared to that time period? Thanks
WIBruin
WIBruin - 3 years ago
Can you please describe your approach to valuation?
buhrlakc
Buhrlakc - 3 years ago
How do you assess the competitive advantage of a business? Which questions do you consider when qualitatively analyzing a business?

cyrano
Cyrano premium member - 3 years ago
Followed you for a while now and have always enjoyed reading your analysis. It looks like the large value stocks could run for quite sometime, perhaps to around 2018 or so. What kind of returns during this time would you expect out of the likes of WMT and such? Thanks in advance.
rjstcr
Rjstcr premium member - 3 years ago
What are your thoughts on MSFT since their announcement of the Skype purchase?
chrislambert
Chrislambert - 3 years ago
You have always been very generous with sharing your market research via your newsletters. How are you currently thinking about 'peak' margins, their sustainability and if and how current earnings levels influences your view on current market valuations on large and small cap stocks. Large caps stocks look cheap but if margins are unsustainable are they really such a bargin on an absolute basis?

Thank you.

Chris
cyrano
Cyrano premium member - 3 years ago


How do you see the U.S. debt problems playing out?

Thank you,

Mark
jbell
Jbell - 3 years ago
Hi Mr. Van Den Berg,

What type of investing literature (books, magazines, newspapers, newsletters, websites) do you consider must reads? Thanks.

Please leave your comment:


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