I just read an old Forbes piece on Walter Schloss: Making Money Out of Junk. As many regular readers know, Schloss is one of my all-time favorite investors. Read more about Schloss on my resource page and also check the Walter Schloss category. He made 21% per year for 47 years, investing in a simple, methodical, low-stress manner working 9 a.m. - 4:30 p.m. with no other employees or assistants other than his son Edwin.
Here are some key takeaways from the interesting Forbes piece:
- Focus on cheap stocks. This means not worrying about earnings at the moment, only asset protection.
- You have three things in your favor here:
- Earnings turn around and the stock appreciates significantly
- Someone buys control of the company (buyout)
- The company begins buying its own stock
Make a List of Investors Who Have Actually Achieved Significant ResultsI have a relatively short list of investors that I’ve studied extensively that have produced exceptional long-term results. I highly recommend doing this as it will provide insight into what actually creates significant outperformance. (It’s not always what you might think). There are lots of well-known investors, but when you look at their track records, many of them have produced just average results (maybe 100 or 200 basis points better than the S&P). I’m not interested in modest outperformance. I’m certainly not interested in average performance (although in the investment business, the S&P 500-which I consider “the average”-is actually quite good). Nonetheless, I want to do much better.
So, make a list of guys who have made 30% a year, or 50% a year in Greenblatt’s case. Study Schloss who made 21% per year for 47 years. Study Graham and Buffett. Study Pabrai. You might notice the same key things I noticed…
How Did The Best Investors Achieve Their Results?Two things that I’ve noticed over and over again when studying the investors who have outperformed (Pabrai, Buffett, Schloss, Graham, Greenblatt, etc…) are:
- They were very concentrated (they did extensive research and bought big positions), or
- They were diversified, but they bought stocks that no one else wanted (they were far less concerned about understanding the intricacies of the business, and more concerned with valuation and numbers).
Read the entire Forbes article for more info on Schloss’ ideas from 1973.
- Mohnish Prabai Undervalued Stocks
- Mohnish Prabai Top Growth Companies
- Mohnish Prabai High Yield stocks, and
- Stocks that Mohnish Prabai keeps buying
- Walter Schloss Undervalued Stocks
- Walter Schloss Top Growth Companies
- Walter Schloss High Yield stocks, and
- Stocks that Walter Schloss keeps buying
- Warren Buffett Undervalued Stocks
- Warren Buffett Top Growth Companies
- Warren Buffett High Yield stocks, and
- Stocks that Warren Buffett keeps buying
- Joe Undervalued Stocks
- Joe Top Growth Companies
- Joe High Yield stocks, and
- Stocks that Joe keeps buying
About the author:
By using separate accounts, Saber offers its clients complete transparency and liquidity (the funds are held in the name of the client and cannot be accessed by the investment manager). Saber looks to partner with like-minded clients who are interested in a patient, long-term approach to investing that is rooted in the principles of value investing.
I also write at the blog www.basehitinvesting.com.
I can be reached at [email protected]