This one comes from December 1965 and is a back and forth between Schloss and Charles Ellis-- I think this one should be sent to a few companies. Excerpts:
"My point is that if the assets are large enough, the stockholders benefit by repurchases at discounts from book value and the purchase of stocks above book value in times of prosperity can be later criticized if earnings decline through no fault of management but simply because of vicissitudes in the industry. "
"Earnings are much more likely to fluctuate than are book values, and therefore estimating longer term earnings than, say, the next year or so can be subject to serious error."
I've been browsing around the online archives of Columbia lately, and I ran into a video lecture with Christopher Browne from 07'. The video itself isn't great quality, but the audio is pretty amusing. Browne jokes around that the hardest part of value investing is fooling people into thinking its actually difficult.
Throughout the video you'll hear Browne talking about these high dividend stocks and the returns they have been producing over 20 years or so- turns out he has also written a paper about it.
Excerpts-
"The ability to pay cash dividends is a positive factor in assessing the underlying health of a company and the quality of its earnings. This is particularly pertinent in light of the complexity of corporate accounting and numerous recent examples of earnings management"
"In Tweedy, Browne's experience highy dividend yields are often associated with stocks selling at low prices in relation to earnings, book value, and specific appraisals of the value that shareholders would receive in a sale of the entire company...."
"Over the last 100 plus years, an investment in a market-oriented portfolio that included, most importantly, reinvested dividends would have produced 85 times the wealth of the same portfolio soley relying on capital gains"
This weeks Sunday Schloss comes from the NYSAA's dedication to him on February 4th 2008: Excerpts- On investing: "I dont like debt (emphasis added)." "What I usually did was get companies that were having troubles, and the stock market doesn't like trouble." "Buy assets rather than earnings." "[Walter] urged the audience to avoid debt at least four times." "The volatility of assets is much lower than that of earnings providing Mr. Schloss with stability in valuation" "[I] also prefer that management of the company owned a decent amount of stock."
On his partnership: "He relies extensively on Value Line" "His average turnover is 25% implying a holding period of four years." "[Walter] only provided investors with quarterly statements, an audit, and a letter to partners. "[Walter] ran his partnership on ultra low expenses"
Today's Schloss comes from 1974. Schloss writes in response to an article from the Financial Analysts Journal and basically calls the comparable company valuation method worthless. I love it.
I can't recall where I found this article or who put it together, but it's a great read. Its a transcript from a Q&A session between Warren and students from UT Austin/Emory University.
Some classic Buffett:
"If it's your game, diversification doesn't make sense. It's crazy to put money into your 20th choice rather than your 1st choice. "
"I spend my time thinking about the future, not the past"
"The (value investing) philosophy either takes immediately or it doesn't at all. The reason gets down to temperament. People want to make money fast, but it doesn't happen that way."
"Getting turned down by (Harvard Business School) HBS was one of the best things that could have happened to me, bad luck can turn out to be good."
Today's Sunday Schloss is a lecture given on November 17th 1993 at Columbia. Some of my favorite quotes:
"I must say, I NEVER have put in a stop loss order because if you like a stock and buy it and it goes down, then you should buy more"
"I agree with Warren to keep it simple and not use higher mathematics in your analysis. I'm always amused when I see a stock go from say 25 to 20 in 1 day when the quarterly earnings come out because the company earned 31 cents instead of 35 cents."
"The key, in my opinion, to successful investing is to relate value to price today. Instead of present value many investment managers are relating future value to present price. Since I cant do that I will let others do it and stick to what has worked for us."
In the spirit of the Berkshire meeting this weekend these letters come from Warren himself back in 1975 and 1994. This letter contains the incredible performance Walter Schloss was able to obtain from 1955-1994. The letter contains some great humor as well:
"....a sub-lease on a portion of a closet at Tweedy, Browne and a group of partners whose names were straight from a roll call at Ellis Island, Walter strode forth to do a battle with the S&P."
"Please note that Walter's total office expense is about $11,000 compared to net income of $19 million." Hat tip to reader Vishnu who sent me this article last week.
Today we'll be looking at an article from Barrons Magazine that interviewed the gentleman over at Tweede Brown. The article covers a wide variety of value topics.
"Browne: This one is what we call a no-brainer. One of Graham's principles was that if you can buy an underleveraged company at two-thirds of net current assets, you just buy it.
Spears: You don't sit there and try to make projections on the future of specialty roll steel mills."
"We have been buying non-US stock since the early 1980's and they represent anywhere from 5% to 15% in our portfolios. We really did it in terms of trying to find more investment opportunities and the rest of the world is pretty developed now...."
