Walter Schloss also disproved the academic theory that the market was efficient and that when private investors and fund managers outperformed the indexes it was mainly due to “pure chance”.
Indeed, Schloss’s own investment firm averaged a 15.3% compound return over four and a half decades versus 10% for the S&P 500 during the same period.
Walter Schloss did not have a traditionally strong academic background like so many of his contemporary investors. Schloss did not attend college instead, in 1934, at the age of 18, he started work as a runner on Wall Street.
During the evenings Schloss took investment courses taught by Graham at the New York Stock Exchange Institute.
But Schloss’s investment career was punctuated by the onset of WW1 where he served four years in the US army.
Returning to civilian life Walter Schloss then went to work for Graham in the Graham-Newman Partnership.
In 1955, Walter Schloss departed from Graham’s company to start his own investment firm where he managed money for 92 investors.
Through a diverse and manageable portfolio, Schloss was able to return on average a 15.3% compound return over the course of 45 years.
Walter Schloss’s fund would consistently outperform the S&P 500 by an average of 5.3% over the same period.
In 2000 Schloss hung up his hat and closed out his fund and by 2003 he was no longer managing other investors’ funds.
Through a diverse and manageable portfolio, Schloss was able to return on average a 15.3% compound return over the course of 45 years
Walter Schloss is a contrarian value investor.The key to his success is investing in stocks that have a low price relative to book value, honest management and have a diversified investment portfolio.
Schloss viewed diversification as a protection against ignorance and he summed up his style in an interview he gave Forbes a number of years ago when he said, “we buy cheap stocks. stocks that are selling below book value”
Walter Schloss added,
“I focus on assets. If you don’t have a lot of debt, it’s worth something”
Schloss’s value investing techniques originated from his mentor, Benjamin Graham (who many believe to be the father of value investing).
Warren Buffett comments on Schloss, “He knows how to identify securities that sell at considerably less than their value to a private owner: And that’s all he does… He owns many more stocks than I do….”
Schloss was also independent minded (which is a typical trait of contrarian investors).
“I don’t seem to have very much influence on Walter. That is one of his strengths; no one has much influence on him, ” said Buffett.
Walter Schloss quote; “…the important part is to have some money in the stock. If you don’t have any money in a stock you tend to forget about it.” Ultimately, you need to commit yourself one way or another in order to make money off of a stock.”
I found that it was much better to look at the figures rather than people – Walter Schloss
The best learning resource Walter Schloss left is an approximately one hour video entitled, “How I Chose Value Investments” which sheds light on the techniques and philosophy he uses to invest in stocks.
The important part is to have some money in the stock. If you don’t have any money in a stock you tend to forget about it – Walter Schloss
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