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The Equitymaster Research Digest

Buy Cheap, Sell Dear
Jun 21, 2017

  • 23,105% returns over 28 years proves that value investing works.
  • Madhu recommends staying away from GSK Consumer...
  • ...but applying to the CDSL IPO.
  • It's raining IPOs! GTPL Hathway opened today - our view.
  • Only two days to go before the next Smart Money Secrets recommendation!
  • Tanushree's The India Letter June recommendation to be released today.

Imagine you bought a stock at Rs 100 and sold it at Rs 23,205. That's how you make 23,105%.

Impossible?

Walter Schloss did it.

I'm not talking about a stock here. This is the return that investors made investing with him, over 28 years. That's almost 21.5% CAGR for close to three decades!

Schloss worked at Graham-Newman Corporation. Yes, the same place Warren Buffett worked and perfected his value investing skills from Benjamin Graham.

in 1955, Schloss left to manage money on his own. His track record from 1956 to 1983 - 23,105% - is simply astounding.

How did he do it?

Taha answered this question four days back in The 5 Minute WrapUp:

  • Considering those returns were the result of 28 years of stock picking...in hundreds-and-hundreds of different stocks...you can be sure his success was no stroke of luck. In a market, full of one-hit-wonders, Schloss obviously had a formula that worked. Through the thick-and-thin of the market.

    It's also important to note that Schloss used no connections or access to company managements. He just looked up company numbers in the manuals available at the time. He was far less interested in the underlying nature of the business and far more interested in the quantitative attractiveness of a stock.

    Walter Schloss seems to have had a strong aversion to loss. Which is probably why he stuck so closely to Graham's principle of margin of safety.

    In the end, Walter Schloss identified securities that sell at considerably less than their value...

    And that's all he did.

    All he thought of was: 'If a business is worth a dollar and I can buy it for 40 cents, something good may happen to me.'

    And he did it over and over and over again.
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