Norman Rentrop: From Successful Entrepreneur to Warren Buffett Disciple

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Jul 17, 2011
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Norman Rentrop is the chairman of Rentrop Investment Office (Rentropsche Vermögensverwaltung). He is an investor in both private and public equity. In private equity Norman has invested in 18 companies in Britain, Ireland, Germany, Austria, Switzerland, Poland, Romania, Russia, China and USA with an IRR of 16.5 % p.a. (1991 – 2002). Among his better known investments have been Sunday Business Post, N-TV (the German news channel) and ADI Auftragsdienst der Deutschen Industrie (Construction Market).

He presents a very entrepreneurial outlook towards investing by not being afraid of going against the crowd and sometimes, even investing against some high sentiment. Norman is a very hands-off investor like his great role model Warren Buffett. You can see him regularly at the Berkshire Hathaway Annual Shareholder meeting (1st Saturday in May in Omaha, NE).

Norman built a 100 million Euro professional publishing company from scratch. After his 40th birthday he moved from the operational side of the publishing company to chairman of the supervisory board to have more time for inner reflection and his family. Currently, the publishing company is run by excellent managers while Norman oversees the investing of his family office. His family office invests in:

a) undervalued public companies

b) merger arbitrage and special situations

c) enhanced indexing

d) Berkshire Hathaway

e) Private equity with a very long term (10+ years) outlook

Rentrop Family Office focuses on investing, growing family wealth and tax administrations and their goal is to grow family wealth 12% p.a. NOT preserve wealth. The Rentrop Family Office treats investors as partners who are expected to contribute by alerting partnership about private companies that fit our criteria. Coming from a business owner perspective that understands the value of keeping cost low they manage to keep the management costs at 0.25% management fee and 0% performance fee.

After WWII, his grandfather taught him to invest in stocks at a time when investing was not a common practice in Germany. After the family’s real estate in Cologne was destroyed in WWII his grandfather drew the conclusion not to invest in inner-city real estate again, but to invest in publicly traded companies. . What more he learned was that stock is a piece of a real company which could be watched or observed every day. Moreover, if you want to go into the accounting profession you have to be satisfied regardless of that fact that there will be people who will make a lot more money than you.

Evolution of investment strategies of Norman Rentrop:

In 1931 there were 3,000 public companies in Germany versus about 1,000 today). In 1967, he bought his first share at the age of 10 and attended his first shareholder meeting at the age of 15.

In his evolution as an investor Norman Rentrop tested different asset classes. In the 1980s he bought silver as an investment, with poor results.

His publishing company was one of the most audacious in delivering their publications to communist east germany and after the separting wall came down in late 1989, there was a lot of pent up demand. Rentrop publishing delivered all orders to East Germany as fast as they could even though there was great uncertainty about the value of the East German Mark. Grey market rates in Zurich looked like 1:20 at the time. When Chancellor Dr. Helmut Kohl decided to exchange the weak East German Mark 1:3 to the strong West German Mark, Rentrop publishing company felt highly rewarded. for East German investments in 1990.

In 1992, Rentrop bought his first share of Berkshire Hathaway, after reading John Train’s ‘The Money Masters’.

In 1993, while on vacation in Florida, he was reading ads in the newspaper for real estate when he saw an ad for a building that had asbestos. As he could not figure out immediately whether the price was for rent or to buy.(the price for sale was as low as 1x a year of rent.), he began to research real estate investments in the U.S. and made several investments. While they all performed, he got more joy out of his investments in businesses and therefore concentrates on what suits his personality best.

Investing in start-up businesses iIn 1993/1994 onwards he made 18 investments; 8 went well, and 10 failed. But the eight that made it did so well, that the return was 2.5x (250 %)a with an IRR of 16.5% p.a.

Being asked about his failures he did not have enough time to go into his hourlong presentation about “How to loose millions and other valuable advice” but briefly spoke about:

Three companies that went bankrupt were:

1. Girmes - a great manufacturing company. It was once a textile company like Berkshire Hathaway, but turned out to be a declining business.

2. Egana Goldpfeil

3. Aero Inventory – a company which supplied machinery like toilets to airlines.

According to Norman, thinking like an investor made him a good entrepreneur. He built up a publishing company from scratch that is flourishing with annual sales of more than 100 million Euros, which was clearly a very successful venture. Additionally, investing like an entrepreneur made him a successful investor. He is always is nearly 100% invested and tries to avoid holding cash because he has never met anyone who is able to time the market. Over the past 10 years, his investments have out-performed the DAX 5.32% annually.

The 3 criteria of Warren Buffett:

1. Outstanding Business. (What is the longterm sustainable competitive advantage)

2. Integrity of Management. (Do they love the money or do they love what they do)

3. Attractiveness of price.

Investment has to fit ones personality and the approaches should be accordingly selected. A person should determine what drives him/her by asking questions like: What are my talents? What are my gifts? What do I enjoy? Where do I find fulfilment?

Another important factor is that there should be no debt. “The only time when I did not sleep well was when I had a loan of DM 1 million to expand my publishing business. I felt very relieved when I had completely paid it back.”

What has worked in business which can be put to work in investments:

• Board

• Benchmarking

• Measuring (what gets measured does get done)

• Test (Try everything and keep the good)

• Investing is most intelligent when it is most business-like (Benjamin Graham)

Disclosure: None

Disclosure: None

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