The Superinvestors of Graham-and-Doddsville (2)

續前文。。。。


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The first example (see Table 1) is that of Walter Schloss. Walter never went to college, but took a course from Ben Graham at night at the New York Institute of Finance. Walter left Graham-Newman in 1955 and achieved the record shown here over 28 years. Here is what "Adam Smith" -- after I told him about Walter -- wrote about him in Supermoney (1972):

He has no connections or access to useful information. Practically no one in Wall Street knows him and he is not fed any ideas. He looks up the numbers in the manuals and sends for the annual reports, and that's about it.

In introducing me to (Schloss) Warren had also, to my mind, described himself. "He never forgets that he is handling other people's money, and this reinforces his normal strong aversion to loss." He has total integrity and a realistic picture of himself. Money is real to him and stocks are real -- and from this flows an attraction to the "margin of safety" principle.

Table 1: Walter J. Schloss
Year	S&P Overall Gain, Including Dividends [%]	WJS Ltd Partners Overall Gain per Year [%]	WJS Partnership Overall Gain per Year [%]
1956	7,5	5,1	6,8	Standard & Poor's 28 ¼ year compounded gain	887,2%
1957	-10,5	-4,7	-4,7	WJS Limited Partner 28 ¼ year compounded gain	6.678,8%
1958	42,1	42,1	54,6	WJS Partnership 28 ¼ year compounded gain	23.104,7%
1959	12,7	17,5	23,3	Standard & Poor's 28 ¼ year annual compounded rate	8,4%
1960	-1,6	7,0	9,3	WJS Limited Partner 28 ¼ year annual compounded rate	16,1%
1961	26,4	21,6	28,8	WJS Partnership 28 ¼ year annual compounded rate	21,3%
1962	-10,2	8,3	11,1
1963	23,3	15,1	20,1
1964	16,5	17,1	22,8
1965	13,1	26,8	35,7
1966	-10,4	0,5	0,7
1967	26,8	25,8	34,4
1968	10,6	26,6	35,5
1969	-7,5	-9,0	-9,0
1970	2,4	-8,2	-8,2
1971	14,9	25,5	28,3
1972	19,8	11,6	15,5
1973	-14,8	-8,0	-8,0
1974	-26,6	-6,2	-6,2
1975	36,9	42,7	52,2
1976	22,4	29,4	39,2
1977	-8,6	25,8	34,4
1978	7,0	36,6	48,8
1979	17,6	29,8	39,7
1980	32,1	23,3	31,1
1981	-6,7	18,4	24,5
1982	20,2	24,1	32,1
1983	22,8	38,4	51,2
1984 (1st Qtr.)	-2,3	0,8	1,1

During the history of the Partnership it has owned over 800 issues and, at most time, has had at least 100 positions. Present assets under management approximate $45 million.

Walter has diversified enormously, owning well over 100 stocks currently. 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 doesn't worry about whether it it's January, he doesn't worry about whether it's Monday, he doesn't worry about whether it's an election year. He simply says, if a business is worth a dollar and I can buy it for 40 cents, something good may happen to me. And he does it over and over and over again. He owns many more stocks than I do -- and is far less interested in the underlying nature of the business; I don't seem to have very much influence on Walter. That's one of his strengths; no one has much influence on him.

The second case is Tom Knapp, who also worked at Graham-Newman with me. Tom was a chemistry major at Princeton before the war; when he came back from the war, he was a beach bum. And then one day he read that Dave Dodd was giving a night course in investments at Columbia. Tom took it on a noncredit basis, and he got so interested in the subject from taking that course that he came up and enrolled at Columbia Business School, where he got the MBA degree. He took Dodd's course again, and took Ben Graham's course. Incidentally, 35 years later I called Tom to ascertain some of the facts involved here and I found him on the beach again. The only difference is that now he owns the beach!

In 1968, Tom Knapp and Ed Anderson, also a Graham disciple, along with one or two other fellows of similar persuasion, formed Tweedy, Browne Partners, and their investment results appear in Table 2. Tweedy, Browne built that record with very wide diversification. They occasionally bought control of businesses, but the record of the passive investments is equal to the record of the control investments.

Table 3 describes the third member of the group who formed Buffett Partnership in 1957. The best thing he did was to quit in 1969. Since then, in a sense, Berkshire Hathaway has been a continuation of the partnership in some respects. There is no single index I can give you that I would feel would be a fair test of investment management at Berkshire. But I think that any way you figure it, it has been satisfactory.

Table 2: Tweedy, Browne Inc.						Table 3: Buffett Partnership, Ltd.
Period Ended (September 30)	Dow Jones* [%]	S&P 500* [%]	TBK Overall [%]	TBK Limited Partners [%]		Year	Dow Jones [%]	Partnership Results [%]	Limited Partners' Results [%]
1968 (9 month)	6,0	8,8	27,6	22,0		1957	-8,4	10,4	9,3
1969	-9,5	-6,2	12,7	10,0		1958	38,5	40,9	32,2
1970	-2,5	-6,1	-1,3	-1,9		1959	20,0	25,9	20,9
1971	20,7	20,4	20,9	16,1		1960	-6,2	22,8	18,6
1972	11,0	15,5	14,6	11,8		1961	22,4	45,9	35,9
1973	2,9	1,0	8,3	7,5		1962	-7,6	13,9	11,9
1974	-31,8	-38,1	1,5	1,5		1963	20,6	38,7	30,5
1975	36,9	37,8	28,8	22,0		1964	18,7	27,8	22,3
1976	29,6	30,1	40,2	32,8		1965	14,2	47,2	36,9
1977	-9,9	-4,0	23,4	18,7		1966	-15,6	20,4	16,8
1978	8,3	11,9	41,0	32,1		1967	19,0	35,9	28,4
1979	7,9	12,7	25,5	20,5		1968	7,7	58,8	45,6
1980	13,0	21,1	21,4	17,3		1969	-11,6	6,8	6,6
1981	-3,3	-2,7	14,4	11,6		On a cumulative or compounded basis, the results are:
1982	12,5	10,1	10,2	8,2		1957	-8,4	10,4	9,3
1983	44,5	44,3	35,0	28,2		1957-58	26,9	55,6	44,5
Total Return 15 ¾ years	191,8%	238,5%	1.661,2%	936,4%		1957-59	52,3	95,9	74,7
						1957-60	42,9	140,6	107,2
Standard & Poor's 15 ¾ year annual compounded rate				7,0%		1957-61	74,9	251,0	181,6
TBK Limited Partner 15 ¾ year annual compounded rate				16,0%		1957-62	61,6	299,8	215,1
TBK Gesamt 15 ¾ year annual compounded rate				20,0%		1957-63	94,9	454,5	311,2
						1957-64	131,3	608,7	402,9
						1957-65	164,1	943,2	588,5
						1957-66	122,9	1.156,0	704,2
						1957-67	165,3	1.606,9	932,6
						1957-68	185,7	2.610,6	1.403,5
						1957-69	152,6	2.794,9	1.502,7
						Annual Compounded Rate	7,4	29,5	23,8

*Includes dividends paid for both Standard & Poor's 500 Composite Index an Dow Jones Industrial Average.



Table 4 shows the record of the Sequoia Fund, which is managed by a man whom I met in 1951 in Ben Graham's class, Bill Ruane. After getting out of Harvard Business School, he went to Wall Street. Then he realized that he needed to get a real business education so he came up to take Ben's course at Columbia, where we met in early 1951. Bill's record from 1951 to 1970, working with relatively small sums, was far better than average. When I wound up Buffett Partnership I asked Bill if he would set up a fund to handle all our partners, so he set up the Sequoia Fund. He set it up at a terrible time, just when I was quitting. He went right into the two-tier market and all the difficulties that made for comparative performance for value-oriented investors. I am happy to say that my partners, to an amazing degree, not only stayed with him but added money, with the happy result shown here.

Table 4: Sequoia Fund, Inc.
	Annual Percentage Change**
Year	Sequoia Fund [%]	S&P 500 Index* [%]
1970 (from July 15)	12,1	20,6
1971	13,5	14,3
1972	3,7	18,9
1973	-24,0	-14,8
1974	-15,7	-26,4
1975	60,5	37,2
1976	72,3	23,6
1977	19,9	-7,4
1978	23,9	6,4
1979	12,1	18,2
1980	12,6	32,3
1981	21,5	-5,0
1982	31,2	21,4
1983	27,3	22,4
1984 (first quarter)	-1,6	-2,4
Entire Period	775,3%	270,0%
Compound Annual Return	17,2%	10,0%
Plus 1% Management Fee	1,0%
Gross Investment Return	18,2%	10,0%

*Includes dividends (and capital gains distributions in the case of
Sequoia Fund) treated as though reinvested.

**These figures differ slightly from the S&P figures in Table 1
because of a difference in calculation of reinvested dividends.

There's no hindsight involved here. Bill was the only person I recommended to my partners, and I said at the time that if he achieved a four-point-per-annum advantage over the Standard & Poor's, that would be solid performance. Bill has achieved well over that, working with progressively larger sums of money. That makes things much more difficult. Size is the anchor of performance. There is no question about it. It doesn't mean you can't do better than average when you get larger, but the margin shrinks. And if you ever get so you're managing two trillion dollars, and that happens to be the amount of the total equity valuation in the economy, don't think that you'll do better than average!

I should add that in the records we've looked at so far, throughout this whole period there was practically no duplication in these portfolios. These are men who select securities based on discrepancies between price and value, but they make their selections very differently. Walter's largest holdings have been such stalwarts as Hudson Pulp & Paper and Jeddo Highland Coal and New York Trap Rock Company and all those other names that come instantly to mind to even a casual reader of the business pages. Tweedy Browne's selections have sunk even well below that level in terms of name recognition. On the other hand, Bill has worked with big companies. The overlap among these portfolios has been very, very low. These records do not reflect one guy calling the flip and fifty people yelling out the same thing after him.

Table 5 is the record of a friend of mine who is a Harvard Law graduate, who set up a major law firm. I ran into him in about 1960 and told him that law was fine as a hobby but he could do better. He set up a partnership quite the opposite of Walter's. His portfolio was concentrated in very few securities and therefore his record was much more volatile but it was based on the same discount-from-value approach. He was willing to accept greater peaks and valleys of performance, and he happens to be a fellow whose whole psyche goes toward concentration, with the results shown. Incidentally, this record belongs to Charlie Munger, my partner for a long time in the operation of Berkshire Hathaway. When he ran his partnership, however, his portfolio holdings were almost completely different from mine and the other fellows mentioned earlier.

Table 5: Charles Munger
Year	Mass. Inv. Trust [%]	Investors Stock [%]	Lehman [%]	Tri-Cont. [%]	Dow [%]	Over-all Partnership [%]	Limited Partners [%]
Yearly Results (1)
1962	-9,8	-13,4	-14,4	-12,2	-7,6	30,1	20,1
1963	20,0	16,5	23,8	20,3	20,6	71,7	47,8
1964	15,9	14,3	13,6	13,3	18,7	49,7	33,1
1965	10,2	9,8	19,0	10,7	14,2	8,4	6,0
1966	-7,7	-9,9	-2,6	-6,9	-15,7	12,4	8,3
1967	20,0	22,8	28,0	25,4	19,0	56,2	37,5
1968	10,3	8,1	6,7	6,8	7,7	40,4	27,0
1969	-4,8	-7,9	-1,9	0,1	-11,6	28,3	21,3
1970	0,6	-4,1	-7,2	-1,0	8,7	-0,1	-0,1
1971	9,0	16,8	26,6	22,4	9,8	25,4	20,6
1972	11,0	15,2	23,7	21,4	18,2	8,3	7,3
1973	-12,5	-17,6	-14,3	-21,3	-13,1	-31,9	-31,9
1974	-25,5	-25,6	-30,3	-27,6	-23,1	-31,5	-31,5
1975	32,9	33,3	30,8	35,4	44,4	73,2	73,2
Compound Results (2)
1962	-9,8	-13,4	-14,4	-12,2	-7,6	30,1	20,1
1962-3	8,2	0,9	6,0	5,6	11,5	123,4	77,5
1962-4	25,4	15,3	20,4	19,6	32,4	234,4	136,3
1962-5	38,2	26,6	43,3	32,4	51,2	262,5	150,5
1962-6	27,5	14,1	39,5	23,2	27,5	307,5	171,3
1962-7	53,0	40,1	78,5	54,5	51,8	536,5	273,0
1962-8	68,8	51,4	90,5	65,0	63,5	793,6	373,7
1962-9	60,7	39,4	86,9	65,2	44,5	1.046,5	474,6
1962-70	61,7	33,7	73,4	63,5	57,1	1.045,4	474,0
1962-71	76,3	56,2	119,5	100,1	72,5	1.336,3	592,2
1962-72	95,7	79,9	171,5	142,9	103,9	1.455,5	642,7
1962-73	71,2	48,2	132,7	91,2	77,2	959,3	405,8
1962-74	27,5	10,3	62,2	38,4	36,3	625,6	246,5
1962-75	69,4	47,0	112,2	87,4	96,8	1.156,7	500,1
Average Annual Compounded Rate	3,8	2,8	5,5	4,6	5,0	19,8	13,7