“I worked for Benjamin Graham for 9 1/2 years, and Ben said he was going to retire and move to California,” began Schloss. “I had to get another job, so one of the people who was a stockholder of Graham Newman came to me and said, ‘Walter, if you start a fund, I will put some money in it.’ We ended up with $100,000. The structure was that I would not get paid unless we realized gains. The kind of stocks I bought were not growth stocks. Graham was really value-oriented. In those days he would buy stocks that were selling below working capital. There were less of them, but they were still around.
“Since I only liked to buy stocks that were undervalued from a statistical point of view, they were not necessarily great companies. There was no particular point in hanging on to them indefinitely. We were buying companies on the way down and selling them on the way up. Not every company worked out, but enough of them did, so we had a pretty good record.
“There was 15% per year for the partners, and we got 5%. When you start with $100,000 dollars and you make 20%, that isn’t a great deal of money. What you really had to do was to increase the amount of money invested. Most people that had invested were not wealthy people. They would use their money to put their kids through college or for living expenses rather than investing it. We had a few wealthy partners, and those were the partners that did the best because they kept on reinvesting the money, and when we finished we had about $130 million in the fund.
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“Since I only liked to buy stocks that were undervalued from a statistical point of view, they were not necessarily great companies. There was no particular point in hanging on to them indefinitely. We were buying companies on the way down and selling them on the way up. Not every company worked out, but enough of them did, so we had a pretty good record.
“There was 15% per year for the partners, and we got 5%. When you start with $100,000 dollars and you make 20%, that isn’t a great deal of money. What you really had to do was to increase the amount of money invested. Most people that had invested were not wealthy people. They would use their money to put their kids through college or for living expenses rather than investing it. We had a few wealthy partners, and those were the partners that did the best because they kept on reinvesting the money, and when we finished we had about $130 million in the fund.
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