Van Den Berg Shares What Shaped His Investing Philosophy

GuruFocus contributor Jae Jun wrote a good article here about value investor Arnold Van Den Berg (Trades, Portfolio). Van Den Berg is the CEO and founder of Century Management, which began in 1974. I had never heard of him but serendipitously learned that he recently gave a lecture at Google. I’ve posted the video below. It’s titled “Experiential Wisdom on Value Investing.”

Van Den Berg comes across as a very likeable and inspirational person. He spends the first 10 minutes talking about his rough childhood. Van Den Berg grew up during World War II and his family lived down the street from Anne Frank. If you are familiar with the “Diary of Anne Frank,” then you have a good idea of what Van Den Berg’s upbringing was like. He tells the story of two groups of people during the war. One group helped his family hide from the Nazis. Another group turned his family in for extra rations. That episode fascinated him and wanted to understand the difference between the two groups. He eventually realized that it came down to people’s perspective on principles. Some people prioritize their principles above life, and others value their lives over principles.

He then tells the story of how his father survived the death marches between concentration camps. The marches consisted of malnourished prisoners walking non-stop for 20 miles in freezing snow. If a prisoner fell and was slow to get up, they were executed. His father’s secret was to remain singularly focused on one step at a time. From these stories, Van Den Berg explains the principles that guide his life and investing philosophy.

1. Always seek truth.
2. Develop your own set of principles for which you are willing to make sacrifices.
3. Be totally focused.
4. By practicing your principles, you will develop the faith and courage to carry on during tough times.
5. Never give up.

He describes entering the investing world after working at an insurance sales job that he disliked. The last straw at the insurance company was when an unethical co-worker won employee of the month. The job conflicted with his first principle, “always seek truth,” because the salespeople who fudged the truth were better earners, so he had to leave. Van Den Berg talks about entering the stock market at the worst time. He entered at the market peak in the late 60's and shortly thereafter the stock market began to fall precipitously. He studied the funds that did the best during that period and noticed that managers who followed value investing principles suffered less than others during market weakness. His research convinced him to adopt value investing principles for his investing philosophy.

The presentation was given last month. He said there were few opportunities in this richly valued stock market. Of the few opportunities, he talked about oil and gold. His analysis is that oil will likely reach $65 to $70 per barrel by the end of the year. Declining production and increasing demand are the basis for his projection. For gold, Van Den Berg discussed the trend of increasing global debt. There are negative interest rates around the world for the first time. He believed governments printing money and economic uncertainty would motivate people to buy gold. Investors should note that it’s possible Van Den Berg has repositioned his portfolio since this discussion.

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