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A Eulogy for Walter Schloss

February 20, 2012 | About:
John Emerson

John Emerson

132 followers
America lost an investing icon over the weekend; although few individuals outside the small fraternity of Graham and Doddsville are privy to the unique brilliance which Walter Schloss possessed. That fact is almost as sad as his passing.

The genius of Mr. Schloss was rooted in simplicity and tempered with patience. But above all, his stunning success was a direct result of his fundamental sense of value and his practice of self-reliance. You see, Schloss never relied on anyone but himself to achieve his stellar results. He never cared what others were buying and he never lost heart if the overall market outperformed his holdings in the short term. In the long term, he waxed the overall market for decades and left virtually every other investment and fund manager in his wake. He recorded an incredible 16% annual compound average over nearly a 40-year period for his clients, and that stellar performance was recorded after Schloss had deducted his fees.

Mr. Schloss received the only break he needed when Benjamin Graham hired him to work at Graham-Newman as a security analyst. Earlier in his life, Schloss had taken courses offered by Graham and had studied his investment classic, "Security Analysis." Although Schloss never earned a college degree, he developed an adept understanding of value investing, fully absorbing the concepts which were laid out by his mentor.

Schloss never lost his reverence for Benjamin Graham, either. When he conducted interviews in the latter part of his life he always referred to his mentor as Mr. Graham. He was able to relate points which Graham had made to him decades before as if the conversation had occurred yesterday. Schloss not only learned Graham's lessons about value investing he applied them on a daily basis with unwavering confidence.

Many of my readers are probably aware of my extreme admiration for Walter Schloss. I have modeled his philosophy in developing a successful investment strategy. Such concepts as evaluating the intrinsic value of a company by analyzing the tangible equity of a business come directly from the Schloss playbook. In his early days Schloss learned that a margin of safety existed in the form of tangible assets even when the earnings of a company appeared to be in steady decline. Non-tangible assets were referred to in that time as "water on the balance sheet" and Schloss understood that substance was generally safer than water.

Schloss rarely bought an equity unless it traded at a substantial discount to its tangible book value and he rarely purchased equities which were not being discarded by the market. He scoured the list of 52-week lows and discerned which companies were being discarded without merit. The idea that the market was always efficient was pure balderdash in the eyes of Schloss and his bread and butter was preying upon the mistakes of reactionary investors. The simple, albeit overused phrase, "buy low, sell high," was exactly what made Schloss an investing legend.

I believe that the greatest complement which could be paid to Mr. Schloss would be a simple one which in the words of Benjamin Graham would read something like this: Walter knew the difference between investment and speculation and he invariably chose investment rather than speculation in the best interest of his clients.

Rest well Mr. Schloss and thank you for your contribution to my life!

About the author:

John Emerson
I have been of student of value investing since the mid 1990s. I have continued to read and study value theory on an ongoing basis. My investment philosophy most closely resembles Walter Schloss although I employ considerably less diversification. I also pattern my style after Buffett's early investment career when he was able to purchase shares of tiny companies.

Rating: 4.6/5 (61 votes)

Comments

BOBODDY
BOBODDY - 2 years ago
Mr. Schloss was my hero too - he will be missed.
jayb718
Jayb718 premium member - 2 years ago
Well said.
Liarspoker
Liarspoker - 2 years ago


I rarely vote but I gave this eulogy 5 stars. :O)
batbeer2
Batbeer2 premium member - 2 years ago
Interestingly, like Kahn, Buffett, Munger & Whitman, Walter Schloss clearly did not do it for the money. Some like solving sudokus, others paint, bowl, play bridge or fish. The best value investors enjoy scanning thousands of documents in search of cheap stocks.

RIP Mr. Schloss.
quinn70
Quinn70 - 2 years ago
Nice eulogy for a true legend.
Graham101
Graham101 - 2 years ago
I was shocked to read the news.

He was the ultimate example of the triumph of sound and simple principles (and the firmness of character to stick to them) over the nonsense on Wall Street. He was a generous human being in conveying the valuable knowledge he accumulated over his lifetime. He truly deserved the success he accomplished.

Mr Schloss, you never knew me but you have influenced me with your career and principles more than you can imagine.

Rest In Peace and Thank you for your contribution to my life.
Adib Motiwala
Adib Motiwala - 2 years ago
Well written.
treewx
Treewx - 2 years ago
Nice Eulogy. Walter.. was inspirational for me as the every man investor. Top of class getting Warren is one thing, but to have someone without a college degree apply the principles of Graham and Dodd so well, that what impresses me. Walter left Graham Newman and lived off the income from his small 100k partnership. That guttsy and inspiring. Thanks Walter.
Jose Vasquez
Jose Vasquez - 2 years ago
In case you're further interested in this great legend: http://www.gurufocus.com/news/138200/walter-schloss-the-essence-of-value-investing
Kenster
Kenster - 2 years ago

Obituary - New York Times, Feb 20, 2012

WALTER J. SCHLOSS











SCHLOSS--Walter J., of Manhattan and New Canaan, CT, a renowned value investor, died on February 19, 2012 at the age of 95, surrounded by his family. Born on August 28, 1916, he was the son of Jerome H. Schloss and Evelyn Gomprecht Schloss. Beloved husband of Ann (Pearson) Schloss and the late Louise (Filer) Schloss, father of Edwin Walter Schloss, Stephanie Schloss Scott and Samuel Wennberg. He was the brother of Marjorie Isaac, grandfather of Katie and Emily Schloss; James Scott; Claire, Lenna, and Maren Wennberg. Mr. Schloss grew up in Manhattan, attended Franklin School and the New York Stock Exchange Institute, where he studied under Benjamin Graham. He enlisted in the Army on December 8, 1942, rising to the rank of Second Lieutenant. He served in Iran as part of the US Signal Corps, finishing out his wartime service at the Pentagon. At the end of WWII, he was invited by Benjamin Graham to join the firm of Graham Newman as a securities analyst. In 1955 Mr. Schloss set up his own investment management partnership, Walter J. Schloss Associates. His son, Edwin, joined the company in 1973. Walter managed investments with utmost integrity and a commitment to his clients. He retired in 2002 at the age of 87. Warren Buffett referred to Walter as a "super investor". In his 2006 Letter to Shareholders, Buffet said: "Let me end this section by telling you about one of the good guys of Wall Street, my long-time friend Walter Schloss, who last year turned 90. From 1956 to 2002, Walter managed a remarkably successful investment partnership, from which he took not a dime unless his investors made money. My admiration for Walter, it should be noted, is not based on hindsight. A full fifty years ago, Walter was my sole recommendation to a St. Louis family who wanted an honest and able investment manager." Mr. Schloss has been profiled in numerous financial journals including Barrons, Forbes, and Fortune. His investment archive is housed at Columbia University. He served as Treasurer of Freedom House. Walter Schloss had an insatiable curiosity about the world. His business and personal integrity is legendary. He was a proud New Yorker, an inveterate NY Yankees fan, a bird watcher in his beloved Central Park, and excelled at bridge. In 2000, while on a tour of France, he met Ann Pearson, whom he married in 2001. Their shared enjoyment of travel, theater, and family get-togethers brought them a decade of happiness. Above all, he was dedicated to his family. A private service will be held for the family. A reception for family and friends will be scheduled at a later date. Memorial contributions may be sent to Central Park Conservancy, Public Broadcasting System (PBS) or Freedom House, Washington DC.






Published in The New York Times on February 20, 2012

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