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GuruFocus Interview with Investor Arnold Van Den Berg

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gurufocus

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gurufocus
GuruFocus - Stock Picks and Market Insight of Gurus

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Comments

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 Talbert, 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?

[Van Den Berg] Since the beginning of the year, many of our stocks reached our targets and by selling them, our cash balance has increased. While we have found several new ideas, the dollar values invested haven’t yet made up for the values sold; we certainly anticipate this will change. We will happily invest when we see good values considering the current environment.

Arnold; I guess this means that prior to the largest bath the stock market has taken since the great depression you were happily investing in companys such as the three mentioned and considered them as good values considering the then current environment". You got clobbered on those.
loueb
Loueb premium member - 3 years ago
Rjstcr,

Prices plunged. That doesn't necessarily mean that value changed. I doubt that Mr. Van Den Berg is indifferent to price collapses of the magnitude seen in the recent crash, but that doesn't mean his investment philosophy and approach to picking stocks should change. He sounds to me like a very astute and disciplined manager. After reading your comment, I checked his performance over the 36.5 years that Century Management has been in business and, at a CAGR of 15.77% p.a., I think we should be grateful for his insights. Few have achieved what he has.
loueb
Loueb premium member - 3 years ago
CORRECTION: 14.77% p.a.
rjstcr
Rjstcr premium member - 3 years ago
Loueb; Frankly I am buying many of the stocks that he is recommending but not because of him although I do think he is quite an individual. If you would have invested with him at the beginning he had a good record. However this is his record for recent years taken from his web site.

CM Value 1 Composite

10 yrs - net of fees + 5.08% S&P 500 adjusted +3.25%

5 yrs - " " " + 0.05% " " " +2.54%

3 yrs - " " +1.39% " " " +2.26%

1 yr = " " +11.73% " " " +15.29%

Those three stocks among others I mentioned in my question were being heavily bought by him and for clients. Check where their value is today as an example compared to then. I was trying to ask what he see's different today than then. Is he using the same metrics? Maybe he is a lot less confident today about things than back then. Also I admit that he was certainly not the only one that got clobbered.
loueb
Loueb premium member - 3 years ago
Rjstcr,

I hear you. Century Management has underperformed over the past few years, no question. I just don't think it was because of poor judgment. My own opinion is that the poor judgment has been on the part of the market overall, because junk has outperformed quality for much of the rally since the bottom in March of 2009. The big risk-takers are always right when things are going well, but once prices decline, they are left holding a bag full of very problematic businesses whose values (not just price) are likely to have evaporated. A portfolio like Mr. Van Den Berg's, which consists of not just cheap stocks but cheap quality stocks, will likely still retain its value regardless of current market price.

A disciplined value manager will usually underperform during the bubble period. Clients leave in droves because he/she is unwilling to jump on the bandwagon, drink the Kool-Aid, dance close to the cliff's edge, etc. Usually, however, time proves the likes of Mr. Van Den Berg right. Jeremy Grantham said it very well in one of his recent letters when he pointed out (para-phrasing), "Value is a poor indicator of prospective returns over the short term, but it becomes a monster over time."

That said, I also agree with you if what you're suggesting is that value investors, in general, could think more about overall market valuation and not only valuations of individual stocks. At times like now, when, for example, Cisco Systems looks like a great value (I bought shares yesterday), but the market overall is looking overpriced by a considerable margin based on Shiller P/E's, Q-Ratio, long-term trendlines, and many other metrics, we would likely do well to protect ourselves. I don't think Ben Graham would disapprove of what some of the value-oriented hedge funds are doing.
rjstcr
Rjstcr premium member - 3 years ago


Rjstcr,

I hear you. Century Management has underperformed over the past few years, no question. I just don't think it was because of poor judgment. My own opinion is that the poor judgment has been on the part of the market overall, because junk has outperformed quality for much of the rally since the bottom in March of 2009. The big risk-takers are always right when things are going well, but once prices decline, they are left holding a bag full of very problematic businesses whose values (not just price) are likely to have evaporated. A portfolio like Mr. Van Den Berg's, which consists of not just cheap stocks but cheap quality stocks, will likely still retain its value regardless of current market price.

A disciplined value manager will usually underperform during the bubble period. Clients leave in droves because he/she is unwilling to jump on the bandwagon, drink the Kool-Aid, dance close to the cliff's edge, etc. Usually, however, time proves the likes of Mr. Van Den Berg right. Jeremy Grantham said it very well in one of his recent letters when he pointed out (para-phrasing), "Value is a poor indicator of prospective returns over the short term, but it becomes a monster over time."

That said, I also agree with you if what you're suggesting is that value investors, in general, could think more about overall market valuation and not only valuations of individual stocks. At times like now, when, for example, Cisco Systems looks like a great value (I bought shares yesterday), but the market overall is looking overpriced by a considerable margin based on Shiller P/E's, Q-Ratio, long-term trendlines, and many other metrics, we would likely do well to protect ourselves. I don't think Ben Graham would disapprove of what some of the value-oriented hedge funds are doing.

Loueb; I agree!
Victor Riesco
Victor Riesco premium member - 3 years ago
Great Stuff.
rjstcr
Rjstcr premium member - 3 years ago
Loueb; One last observation for what it's worth. I know the time frame is not long enough for a valid comparison but - for the last 2 1/2 - 3 years it's interesting to compare what Century has returned compared with a simple screener like Guru Focus 25 undervalued or Buffett screener. I don't work for Guru Focus by the way, I'm retired.

$1,000,000.00 invested with Century per their site would be about 13% net of fees.

$1,000,000.00 invested in the 25 undervalued per their figures if their accurate would now be worth $1,961,440.00 or 96.14% gain.

$1,000,000.00 in the Buffett Screener would be $1,725,000.00 or + 72.57%.

If those figures are even off by 1/2 that's still quite good in comparison. Haven't looked to see why from the extreme low Century has lagged so much. Caught in big losses they had to wait out?

Were pretty fully invested so didn't have liquidity to take advantage of extremely low prices, or lots of redemptions? I do notice that their minimums for investors that had gone up to $2,000,000.00 is now back to $1,000,000.00.
loueb
Loueb premium member - 3 years ago
Rjstcr,

You're right, those are stark comparisons. Since I am not familiar with the screens you mentioned - I don't ever check them - I should refrain from commenting.

Thanks for the friendly exchange. I've enjoyed it.
gurufocus
Gurufocus premium member - 3 years ago
Rjstcr,

Thank you for mentioning GuruFocus screens and Model Portfolios. Those numbers are accurate, they are only off to lower side by a bit because we didn't count dividend in the returns.

This is Buffett Munger Screener Model Portfolio and Undervalued predictable model portfolio

To be fair to Mr. Van Den Berg, the model portfolios we have are always fully invested, which may not be the case for real portfolios.

Indeed, Mr. Van Den Berg Achieved extremely good long term track record. Our model portfolios had only 2.5 years.

buffetteer17
Buffetteer17 premium member - 3 years ago
Quote: "In the area of health, I would recommend 'The China Study' by Dr. Colin Campbell. It is my personal feeling that this book will be as important to health one day as "Security Analysis" is to stocks."

Indeed an important book, but perhaps not for the reasons Van Den Berg thinks. A blogger, Denise Minger, has analysed the data in the study and has thoroughly refuted Colin Campbell's dietary conclusions. [http://rawfoodsos.com/2010/07/07/the-china-study-fact-or-fallac/][]

lazymc2005
Lazymc2005 - 3 years ago

Arnold Van Den Berg is good.Very similar with warren buffett

jogden
Jogden - 3 years ago


what is your average return over 30 years?Do You know Arnold's/
RIPDOG44
RIPDOG44 premium member - 3 years ago


Tremendous value in the interview and the comments. Thanks.

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