Quelltext der Seite Superinvestors of Graham-and-Doddsville

== Original-Text<ref>[https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors The Superinvestors of Graham-and-Doddsville]</ref> ==
'''<big>The Superinvestors of Graham-and-Doddsville</big>'''

“Superinvestor” Warren E. Buffett, who got an A+ from Ben Graham at Columbia in 1951, never stopped making the grade. He made his fortune using the principles of Graham and Dodd's . Here, in celebration of the 50th anniversary of that classic text, he tracks the records of investors who stick to the “value approach” and have gotten rich going by the book.

Columbia Business

Warren Buffett

May 17, 1984

Is the Graham and Dodd “look for  values with a significant margin of safety relative to prices”  approach to security analysis out of date? Many of the professors who  write textbooks today say yes. They argue that the stock market is  efficient; that is, that stock prices reflect everything that is known  about a company’s prospects and about the state of the economy.  There are no undervalued stocks, these theorists argue, because there  are smart security analysts who utilize all available information to  ensure unfailingly appropriate prices. Investors who seem to beat the  market year after year are just lucky. “If prices fully reflect  available information, this sort of investment adeptness is ruled  out,” writes one of today’s textbook authors.

Well, maybe. But I want to present to  you a group of investors who have, year in and year out, beaten the  Standard & Poor’s 500 stock index. The hypothesis that they  do this by pure chance is at least worth examining. Crucial to this  examination is the fact that these winners were all well known to me  and pre-identified as superior investors, the most recent  identification occurring over fifteen years ago. Absent this condition  - that is, if I had just recently searched among thousands of records  to select a few names for you this morning — I would advise you  to stop reading right here. I should add that all of these records  have been audited. And I should further add that I have known many of  those who have invested with these managers, and the checks received  by those participants over the years have matched the stated records.

Before we begin this examination, I  would like you to imagine a national coin-flipping contest.  Let’s assume we get 225 million Americans up tomorrow morning  and we ask them all to wager a dollar. They go out in the morning at  sunrise, and they all call the flip of a coin. If they call correctly,  they win a dollar from those who called wrong. Each day the losers  drop out, and on the subsequent day the stakes build as all previous  winnings are put on the line. After ten flips on ten mornings, there  will be approximately 220,000 people in the United States who have  correctly called ten flips in a row. They each will have won a little  over $1,000.

Now this group will probably start  getting a little puffed up about this, human nature being what it is.  They may try to be modest, but at cocktail parties they will  occasionally admit to attractive members of the opposite sex what  their technique is, and what marvelous insights they bring to the  field of flipping.

Assuming that the winners are getting  the appropriate rewards from the losers, in another ten days we will  have 215 people who have successfully called their coin flips 20 times  in a row and who, by this exercise, each have turned one dollar into a  little over $1 million. $225 million would have been lost, $225  million would have been won.

By then, this group will really lose  their heads. They will probably write books on “How I turned a  Dollar into a Million in Twenty Days Working Thirty Seconds a  Morning.” Worse yet, they’ll probably start jetting around  the country attending seminars on efficient coin-flipping and tackling  skeptical professors with, “If it can’t be done, why are  there 215 of us?”

By then some business school professor  will probably be rude enough to bring up the fact that if 225 million  orangutans had engaged in a similar exercise, the results would be  much the same — 215 egotistical orangutans with 20 straight  winning flips.

I would argue, however, that there are  some important differences in the examples I am going to present. For  one thing, if (a) you had taken 225 million orangutans distributed  roughly as the U.S. population is; if (b) 215 winners were left after  20 days; and if (c) you found that 40 came from a particular zoo in  Omaha, you would be pretty sure you were on to something. So you would  probably go out and ask the zookeeper about what he’s feeding  them, whether they had special exercises, what books they read, and  who knows what else. That is, if you found any really extraordinary  concentrations of success, you might want to see if you could identify  concentrations of unusual characteristics that might be causal  factors.

Scientific inquiry naturally follows  such a pattern. If you were trying to analyze possible causes of a  rare type of cancer — with, say, 1,500 cases a year in the  United States — and you found that 400 of them occurred in some  little mining town in Montana, you would get very interested in the  water there, or the occupation of those afflicted, or other variables.  You know it’s not random chance that 400 come from a small area.  You would not necessarily know the causal factors, but you would know  where to search.

I submit to you that there are ways of defining an origin other than  geography. In addition to geographical origins, there can be what I  call an ''intellectual'' origin. I think you will find that a  disproportionate number of successful coin-flippers in the investment  world came from a very small intellectual village that could be called  Graham-and-Doddsville. A concentration of winners that simply cannot  be explained by chance can be traced to this particular intellectual  village.

Conditions could exist that would make  even that concentration unimportant. Perhaps 100 people were simply  imitating the coin-flipping call of some terribly persuasive  personality. When he called heads, 100 followers automatically called  that coin the same way. If the leader was part of the 215 left at the  end, the fact that 100 came from the same intellectual origin would  mean nothing. You would simply be identifying one case as a hundred  cases. Similarly, let’s assume that you lived in a strongly  patriarchal society and every family in the United States conveniently  consisted of ten members. Further assume that the patriarchal culture  was so strong that, when the 225 million people went out the first  day, every member of the family identified with the father’s  call. Now, at the end of the 20-day period, you would have 215  winners, and you would find that they came from only 21.5 families.  Some naive types might say that this indicates an enormous hereditary  factor as an explanation of successful coin-flipping. But, of course,  it would have no significance at all because it would simply mean that  you didn’t have 215 individual winners, but rather 21.5 randomly  distributed families who were winners.

In this group of successful investors  that I want to consider, there has been a common intellectual  patriarch, Ben Graham. But the children who left the house of this  intellectual patriarch have called their "flips" in very  different ways. They have gone to different places and bought and sold  different stocks and companies, yet they have had a combined record  that simply cannot be explained by randon chance. It certainly cannot  be explained by the fact that they are all calling flips identically  because a leader is signaling the calls for them to make. The  patriarch has merely set forth the intellectual theory for making  coin-calling decisions, but each student has decided on his own manner  of applying the theory.

The common intellectual theme of the investors from  Graham-and-Doddsville is this: they search for discrepancies between  the ''value'' of a business and the ''price'' of small pieces of  that business in the market. Essentially, they exploit those  discrepancies without the efficient market theorist’s concern as  to whether the stocks are bought on Monday or Thursday, or whether it  is January or July, etc. Incidentally, when businessmen buy  businesses, which is just what our Graham & Dodd investors are  doing through the medium of marketable stocks — I doubt that  many are cranking into their purchase decision the day of the week or  the month in which the transaction is going to occur. If it  doesn’t make any difference whether all of a business is being  bought on a Monday or a Friday, I am baffled why academicians invest  extensive time and effort to see whether it makes a difference when  buying small pieces of those same businesses. Our Graham & Dodd  investors, needless to say, do not discuss beta, the capital asset  pricing model, or covariance in returns among securities. These are  not subjects of any interest to them. In fact, most of them would have  difficulty defining those terms. The investors simply focus on two  variables: price and value.

I always find it extraordinary that so many studies are made of price  and volume behavior, the stuff of chartists. Can you imagine buying an  entire business simply because the price of the business had been  marked ''up'' substantially last week and the week before? Of  course, the reason a lot of studies are made of these price and volume  variables is that now, in the age of computers, there are almost  endless data available about them. It isn’t necessarily because  such studies have any utility; it’s simply that the data are  there and academicians have worked hard to learn the mathematical  skills needed to manipulate them. Once these skills are acquired, it  seems sinful not to use them, even if the usage has no utility or  negative utility. As a friend said, to a man with a hammer, everything  looks like a nail.

I think the group that we have  identified by a common intellectual home is worthy of study.  Incidentally, despite all the academic studies of the influence of  such variables as price, volume, seasonality, capitalization size,  etc., upon stock performance, no interest has been evidenced in  studying the methods of this unusual concentration of value-oriented  winners.

I begin this study of results by going  back to a group of four of us who worked at Graham-Newman Corporation  from 1954 through 1956. There were only four — I have not  selected these names from among thousands. I offered to go to work at  Graham-Newman for nothing after I took Ben Graham’s class, but  he turned me down as overvalued. He took this value stuff very  seriously! After much pestering he finally hired me. There were three  partners and four of us at the "peasant" level. All four  left between 1955 and 1957 when the firm was wound up, and it’s  possible to trace the record of three.

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):<blockquote>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.</blockquote>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.
{| class="wikitable"
! colspan="4" |'''TABLE 1 - Walter J. Schloss'''
|-
|Year
|S&P Overall      Gain, Including Dividends (%)
|WJS Partners      Overall Gain per year (%)
|WJS Partnership      Overall Gain per year (%)
|-
| colspan="4" |
|-
|1956
|7.5
|5.1
|6.8
|-
|1957
| -10.5
| -4.7
| -4.7
|-
|1958
|42.1
|42.1
|54.6
|-
|1959
|12.7
|17.5
|23.3
|-
|1960
| -1.6
|7.0
|9.3
|-
|1961
|26.4
|21.6
|28.8
|-
|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
|-
| colspan="4" |
|}
{| class="wikitable"
|Standard &      Poor’s 28¼ year compounded gain
|887.2%
|-
|WJS Limited Partners 28¼      year compounded gain
|6,678.8%
|-
|WJS Partnership 28¼ year      compounded gain
|23,104.7%
|-
|Standard & Poor’s      28¼ year annual compounded rate
|8.4%
|-
|WJS Limited Partners 28¼      year annual compounded rate
|16.1%
|-
|WJS Partnership 28¼ year      annual compounded rate
|21.3%
|-
| colspan="2" |During the history      of the Partnership it has owned over 800 issues and, at most      times, has had at least 
100 positions. Present assets      under management approximate $45 million. The difference between      returns 
of the partnership and returns of the limited      partners is due to allocations to the general partner for      management.    
|}
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.
{| class="wikitable"
! colspan="5" |'''TABLE 2 - Tweedy, Browne Inc.'''
|-
|Period Ended (September 30)
|Dow Jones* (%)
|S & P 500* (%)
|TBK Overall (%)
|TBK Limited Partners (%)
|-
| colspan="5" |
|-
|1968 (9 mos.)
|6.0
|8.8
|27.6
|22.0
|-
|1969
| -9.5
| -6.2
|12.7
|10.0
|-
|1970
| -2.5
| -6.1
| -1.3
| -1.9
|-
|1971
|20.7
|20.4
|20.9
|16.1
|-
|1972
|11.0
|15.5
|14.6
|11.8
|-
|1973
|2.9
|1.0
|8.3
|7.5
|-
|1974
| -31.8
| -38.1
|1.5
|1.5
|-
|1975
|36.9
|37.8
|28.8
|22.0
|-
|1976
|29.6
|30.1
|40.2
|32.8
|-
|1977
| -9.9
| -4.0
|23.4
|18.7
|-
|1978
|8.3
|11.9
|41.0
|32.1
|-
|1979
|7.9
|12.7
|25.5
|20.5
|-
|1980
|13.0
|21.1
|21.4
|17.3
|-
|1981
| -3.3
| -2.7
|14.4
|11.6
|-
|1982
|12.5
|10.1
|10.2
|8.2
|-
|1983
|44.5
|44.3
|35.0
|28.2
|-
| colspan="5" |
|-
|Total Return 15 years
|191.8%
|238.5%
|1,661.2%
|936.4%
|-
| colspan="4" |Standard &      Poor’s 15¾ year annual compounded rate
|7.0%
|-
| colspan="4" |TBK Limited      Partners 15¾ year annual compounded rate
|16.0%
|-
| colspan="4" |TBK Overall      15¾ year annual compounded rate
|20.0%
|-
| colspan="5" |
|-
| colspan="5" |* Includes      dividends paid for both Standard & Poor’s 500 Composite      Index and Dow Jones Industrial Average.
|}
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.
{| class="wikitable"
! colspan="4" |'''TABLE 3 - Buffett Partnership,      Ltd.'''
|-
|Year
|Overall Results from Dow (%)
|Partnership Results (%)
|Limited Partners’ Results      (%)
|-
| colspan="4" |
|-
|1957
| -8.4
|10.4
|9.3
|-
|1958
|38.5
|40.9
|32.2
|-
|1959
|20.0
|25.9
|20.9
|-
|1960
| -6.2
|22.8
|18.6
|-
|1961
|22.4
|45.9
|35.9
|-
|1962
| -7.6
|13.9
|11.9
|-
|1963
|20.6
|38.7
|30.5
|-
|1964
|18.7
|27.8
|22.3
|-
|1965
|14.2
|47.2
|36.9
|-
|1966
| -15.6
|20.4
|16.8
|-
|1967
|19.0
|35.9
|28.4
|-
|1968
|7.7
|58.8
|45.6
|-
|1969
| -11.6
|6.8
|6.6
|-
| colspan="4" |
|-
| colspan="4" |On a cumulative or      compound basis, the results are:
|-
|1957
| -8.4
|10.4
|9.3
|-
|1957-58
|26.9
|55.6
|44.5
|-
|1957-59
|52.3
|95.9
|74.7
|-
|1957-60
|42.9
|140.6
|107.2
|-
|1957-61
|74.9
|251.0
|181.6
|-
|1957-62
|61.6
|299.8
|215.1
|-
|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
|1156.0
|704.2
|-
|1957-67
|165.3
|1606.9
|932.6
|-
|1957-68
|185.7
|2610.6
|1403.5
|-
|1957-69
|152.6
|2794.9
|1502.7
|-
| colspan="4" |
|-
|Annual Compounded Rate
|7.4
|29.5
|23.8
|}
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 of 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.
{| class="wikitable"
! colspan="3" |'''TABLE 4 - Sequoia Fund, Inc.'''
|-
|
| colspan="2" |Annual Percentage      Change**
|-
|Year
|Sequoia Fund (%)
|S&P 500 Index *      (%)
|-
| colspan="3" |
|-
|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
|-
| colspan="3" |
|-
|Entire Period
|775.3%
|270.0%
|-
|Compound Annual Return
|17.2%
|10.0%
|-
|Plus 1% Management Fee
|1.0%
|
|-
| colspan="3" |
|-
|Gross Investment Return
|18.2%
|10.0%
|-
| colspan="3" |
|-
| colspan="3" |* Includes      dividends (and capital gains distributions in the case of Sequoia      Fund) treated as though reinvested.
|-
| colspan="3" |** 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.
{| class="wikitable"
! colspan="8" |'''TABLE 5 - Charles Munger'''
|-
|Year
|Mass. Inv. Trust (%)
|Investors Stock (%)
|Lehman (%)
|Tri-Cont. (%)
|Dow (%)
|Overall Partnership      (%)
|Limited Partners (%)
|-
| colspan="8" |
|-
| colspan="8" |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
|71.1
|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
|-
| colspan="8" |
|-
| colspan="8" |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
|1046.5
|474.6
|-
|1962-70
|61.7
|33.7
|73.4
|63.5
|57.1
|1045.4
|474.0
|-
|1962-71
|76.3
|56.2
|119.5
|100.1
|72.5
|1336.3
|592.2
|-
|1962-72
|95.7
|79.9
|171.5
|142.9
|103.9
|1455.5
|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
|1156.7
|500.1
|-
| colspan="8" |
|-
|Average Annual 

Compounded Rate
|3.8
|2.8
|5.5
|4.6
|5.0
|19.8
|13.7
|}
Table 6 is the record of a fellow who  was a pal of Charlie Munger’s — another non-business  school type — who was a math major at USC. He went to work for  IBM after graduation and was an IBM salesman for a while. After I got  to Charlie, Charlie got to him. This happens to be the record of Rick  Guerin. Rick, from 1965 to 1983, against a compounded gain of 316  percent for the S&P, came off with 22,200 percent, which probably  because he lacks a business school education, he regards as  statistically significant.
{| class="wikitable"
! colspan="4" |'''TABLE 6 - Pacific Partners,      Ltd.'''
|-
|Year
|S & P 500 Index (%)
|Limited Partnership Results (%)
|Overall Partnership Results (%)
|-
| colspan="4" |
|-
|1965
|12.4
|21.2
|32.0
|-
|1966
| -10.1
|24.5
|36.7
|-
|1967
|23.9
|120.1
|180.1
|-
|1968
|11.0
|114.6
|171.9
|-
|1969
| -8.4
|64.7
|97.1
|-
|1970
|3.9
| -7.2
| -7.2
|-
|1971
|14.6
|10.9
|16.4
|-
|1972
|18.9
|12.8
|17.1
|-
|1973
| -14.8
| -42.1
| -42.1
|-
|1974
| -26.4
| -34.4
| -34.4
|-
|1975
|37.2
|23.4
|31.2
|-
|1976
|23.6
|127.8
|127.8
|-
|1977
| -7.4
|20.3
|27.1
|-
|1978
|6.4
|28.4
|37.9
|-
|1979
|18.2
|36.1
|48.2
|-
|1980
|32.3
|18.1
|24.1
|-
|1981
| -5.0
|6.0
|8.0
|-
|1982
|21.4
|24.0
|32.0
|-
|1983
|22.4
|18.6
|24.8
|-
| colspan="4" |
|-
| colspan="3" |Standard &      Poor’s 19 year compounded gain
|316.4%
|-
| colspan="3" |Ltd. Partnership 19      year compounded gain
|5,530.2%
|-
| colspan="3" |Overall Partnership      19 year compounded gain
|22,200.0%
|-
| colspan="3" |Standard &      Poor’s 19 year compounded rate
|7.8%
|-
| colspan="3" |Ltd. Partnership 19      year annual compounded rate
|23.6%
|-
| colspan="3" |Overall Partnership      19 year annual compounded rate
|32.9%
|}
One sidelight here: it is  extraordinary to me that the idea of buying dollar bills for 40 cents  takes immediately to people or it doesn’t take at all.  It’s like an inoculation. If it doesn’t grab a person  right away, I find that you can talk to him for years and show him  records, and it doesn’t make any difference. They just  don’t seem able to grasp the concept, simple as it is. A fellow  like Rick Guerin, who had no formal education in business, understands  immediately the value approach to investing and he’s applying it  five minutes later. I’ve never seen anyone who became a gradual  convert over a ten-year period to this approach. It doesn’t seem  to be a matter of IQ or academic training. It’s instant  recognition, or it is nothing.

Table 7 is the record of Stan  Perlmeter. Stan was a liberal arts major at the University of Michigan  who was a partner in the advertising agency of Bozell & Jacobs. We  happened to be in the same building in Omaha. In 1965 he figured out I  had a better business than he did, so he left advertising. Again, it  took five minutes for Stan to embrace the value approach.
{| class="wikitable"
! colspan="3" |'''TABLE 7 - Perlmeter      Investments'''
|-
|Year
|PIL Overall (%)
|Limited Partner (%)
|-
| colspan="3" |
|-
|8/1-12/31/65
|40.6
|32.5
|-
|1966
|6.4
|5.1
|-
|1967
|73.5
|58.8
|-
|1968
|65.0
|52.0
|-
|1969
| -13.8
| -13.8
|-
|1970
| -6.0
| -6.0
|-
|1971
|55.7
|49.3
|-
|1972
|23.6
|18.9
|-
|1973
| -28.1
| -28.1
|-
|1974
| -12.0
| -12.0
|-
|1975
|38.5
|38.5
|-
|1/1-10/31/76
|38.2
|34.5
|-
|11/1/76-10/31/77
|30.3
|25.5
|-
|11/1/77-10/31/78
|31.8
|26.6
|-
|11/1/78-10/31/79
|34.7
|28.9
|-
|11/1/79-10/31/80
|41.8
|34.7
|-
|11/1/80-10/31/81
|4.0
|3.3
|-
|11/1/81-10/31/82
|29.8
|25.4
|-
|11/1/82-10/31/83
|22.2
|18.4
|-
| colspan="3" |
|-
| colspan="2" |Total Partnership      Percentage Gain 8/1/65 through 10/31/83
|4277.2%
|-
| colspan="2" |Limited Partners      Percentage Gain 8/1/65 through 10/31/83
|2309.5%
|-
| colspan="2" |Annual Compound      Rate of Gain Overall Partnership
|23.0%
|-
| colspan="2" |Annual Compound      Rate of Gain Limited Partners
|19.0%
|-
| colspan="2" |Dow Jones      Industrial Average 7/31/65 (Approximate)
|882
|-
| colspan="2" |Dow Jones      Industrial Average 10/31/83 (Approximate)
|1225
|-
| colspan="2" |Approximate      Compound Rate of Gain of DJI including dividends
|7%
|}
Perlmeter does not own what Walter Schloss owns. He does not own what  Bill Ruane owns. These are records made ''independently''. But  every time Perlmeter buys a stock it’s because he’s  getting more for his money than he’s paying. That’s the  only thing he’s thinking about. He’s not looking at  quarterly earnings projections, he’s not looking at next  year’s earnings, he’s not thinking about what day of the  week it is, he doesn’t care what investment research from any  place says, he’s not interested in price momentum, volume, or  anything. He’s simply asking: What is the business worth?

Table 8 and Table 9 are the records of  two pension funds I’ve been involved in. They are not selected  from dozens of pension funds with which I have had involvement; they  are the only two I have influenced. In both cases I have steered them  toward value-oriented managers. Very, very few pension funds are  managed from a value standpoint. Table 8 is the Washington Post  Company’s Pension Fund. It was with a large bank some years ago,  and I suggested that they would do well to select managers who had a  value orientation.
{| class="wikitable"
! colspan="8" |'''TABLE 8 - The Washington Post      Company,'''
'''Master Trust, December 31, 1983'''    
|-
|
| colspan="2" |Current Quarter
| colspan="2" |Year 
Ended    
| colspan="2" |2 Years Ended*
| colspan="2" |3 Years Ended*
| colspan="2" |5 Years Ended*
|-
|
|% 

Ret.
|Rank
|% 
Ret.    
|Rank
|% 
Ret.    
|Rank
|% 
Ret.    
|Rank
|%
 Ret.    
|Rank
|-
| colspan="8" |
|-
| colspan="8" |All Investments
|-
|Manager 
|4.1
|2
|22.5
|10
|20.6
|40
|18.0
|10
|20.2
|3
|-
|Manager
|3.2
|4
|34.1
|1
|33.0
|1
|28.2
|1
|22.6
|1
|-
|Manager 
|5.4
|1
|22.2
|11
|28.4
|3
|24.5
|1
| -
| -
|-
|Master Trust 
|3.9
|1
|28.1
|1
|28.2
|1
|24.3
|1
|21.8
|1
|-
| colspan="8" |
|-
| colspan="8" |Common Stock
|-
|Manager 
|5.2
|1
|32.1
|9
|26.1
|27
|21.2
|11
|26.5
|7
|-
|Manager 
|3.6
|5
|52.9
|1
|46.2
|1
|37.8
|1
|29.3
|3
|-
|Manager 
|6.2
|1
|29.3
|14
|30.8
|10
|29.3
|3
| -
| -
|-
|Master Trust 
|4.7
|1
|41.2
|1
|37.0
|1
|30.4
|1
|27.6
|1
|-
| colspan="8" |
|-
| colspan="8" |Bonds
|-
|Manager 
|2.7
|8
|17.0
|1
|26.6
|1
|19.0
|1
|12.2
|2
|-
|Manager 
|1.6
|46
|7.6
|48
|18.3
|53
|12.7
|84
|7.4
|86
|-
|Manager 
|3.2
|4
|10.4
|9
|24.0
|3
|18.9
|1
| -
| -
|-
|Master Trust 
|2.2
|11
|9.7
|14
|21.1
|14
|15.2
|24
|9.3
|30
|-
| colspan="8" |
|-
| colspan="8" |Bonds & 
Cash Equivalents    
|-
|Manager A
|2.5
|15
|12.0
|5
|16.1
|64
|15.5
|21
|12.9
|9
|-
|Manager B
|2.1
|28
|9.2
|29
|17.1
|47
|14.7
|41
|10.8
|44
|-
|Manager C
|3.1
|6
|10.2
|17
|22.0
|2
|21.6
|1
| -
| -
|-
|Master Trust 
(All Managers)    
|2.4
|14
|10.2
|17
|17.8
|20
|16.2
|2
|12.5
|9
|-
| colspan="8" |
|-
| colspan="8" |* Annualized
|-
| colspan="8" |Rank indicates the      fund’s performance against the A.C. Becker universe.
|-
| colspan="8" |Rank is stated as a      percentile: 1 = best performance, 100 = worst.
|}
As you can see, overall they have been  in the top percentile ever since they made the change. The Post told  the managers to keep at least 25 percent of these funds in bonds,  which would not have been necessarily the choice of these managers.  So, I’ve included the bond performance simply to illustrate that  this group has no particular expertise about bonds. They  wouldn’t have said they did. Even with this drag of 25 percent  of their fund in an area that was not their game, they were in the top  percentile of fund management. The Washington Post experience does not  cover a terribly long period but it does represent many investment  decisions by three managers who were not identified retroactively.

Table 9 is the record of the FMC  Corporation fund. I don’t manage a dime of it myself but I did,  in 1974, influence their decision to select value-oriented managers.  Prior to that time they had selected managers much the same way as  most larger companies. They now rank number one in the Becker survey  of pension funds for their size over the period of time subsequent to  this “conversion” to the value approach. Last year they  had eight equity managers of any duration beyond a year. Seven of them  had a cumulative record better than the S&P. All eight had a  better record last year than the S&P. The net difference now  between a median performance and the actual performance of the FMC  fund over this period is $243 million. FMC attributes this to the  mindset given to them about the selection of managers. Those managers  are not the managers I would necessarily select but they have the  common denominators of selecting securities based on value.
{| class="wikitable"
! colspan="10" |'''TABLE 9 - FMC Corporation      Pension Fund,'''
'''Annual Rate of Return (Percent)'''    
|-
|Period Ending
|1 
Year    
|2 
Years    
|3 
Years    
|4 
Years    
|5 
Years    
|6 
Years    
|7 
Years    
|8 
Years    
|9 
Years    
|-
| colspan="8" |
|-
| colspan="8" |FMC
|-
|1983
|23.0
|
|
|
|
|
|
|
|*17.1
|-
|1982
|22.8
|13.6
|16.0
|16.6
|15.5
|12.3
|13.9
|16.3
|
|-
|1981
|5.4
|13.0
|15.3
|13.8
|10.5
|12.6
|15.4
|
|
|-
|1980
|21.0
|19.7
|16.8
|11.7
|14.0
|17.3
|
|
|
|-
|1979
|18.4
|14.7
|8.7
|12.3
|16.5
|
|
|
|
|-
|1978
|11.2
|4.2
|10.4
|16.1
|
|
|
|
|
|-
|1977
| -2.3
|9.8
|17.8
|
|
|
|
|
|
|-
|1976
|23.8
|29.3
|
|
|
|
|
|
|
|-
|1975
|35.0
| colspan="8" |* 18.5 from      equities only
|-
| colspan="8" |
|-
| colspan="8" |Becker large plan      median
|-
|1983
|15.6
|
|
|
|
|
|
|
|12.6
|-
|1982
|21.4
|11.2
|13.9
|13.9
|12.5
|9.7
|10.9
|12.3
|
|-
|1981
|1.2
|10.8
|11.9
|10.3
|7.7
|8.9
|10.9
|
|
|-
|1980
|20.9
|NA
|NA
|NA
|10.8
|NA
|
|
|
|-
|1979
|13.7
|NA
|NA
|NA
|11.1
|
|
|
|
|-
|1978
|6.5
|NA
|NA
|NA
|
|
|
|
|
|-
|1977
| -3.3
|NA
|NA
|
|
|
|
|
|
|-
|1976
|17.0
|NA
|
|
|
|
|
|
|
|-
|1975
|24.1
|
|
|
|
|
|
|
|
|-
| colspan="8" |
|-
| colspan="8" |S&P 500
|-
|1983
|22.8
|
|
|
|
|
|
|
|15.6
|-
|1982
|21.5
|7.3
|15.1
|16.0
|14.0
|10.2
|12.0
|14.9
|
|-
|1981
| -5.0
|12.0
|14.2
|12.2
|8.1
|10.5
|14.0
|
|
|-
|1980
|32.5
|25.3
|18.7
|11.7
|14.0
|17.5
|
|
|
|-
|1979
|18.6
|12.4
|5.5
|9.8
|14.8
|
|
|
|
|-
|1978
|6.6
| -0.8
|6.8
|13.7
|
|
|
|
|
|-
|1977
| -7.7
|6.9
|16.1
|
|
|
|
|
|
|-
|1976
|23.7
|30.3
|
|
|
|
|
|
|
|-
|1975
|37.2
|
|
|
|
|
|
|
|
|-
| colspan="8" |
|}
So these are nine records of “coin-flippers” from  Graham-and-Doddsville. I haven’t selected them with hindsight  from among thousands. It’s not like I am reciting to you the  names of a bunch of lottery winners — people I had never heard  of before they won the lottery. I selected these men years ago based  upon their framework for investment decision-making. I knew what they  had been taught and additionally I had some personal knowledge of  their intellect, character, and temperament. It’s very important  to understand that this group has assumed far less risk than average;  note their record in years when the general market was weak. While  they differ greatly in style, these investors are, mentally, ''always   buying the business, not buying the stock''. A few of them sometimes  buy whole businesses far more often they simply buy small pieces of  businesses. Their attitude, whether buying all or a tiny piece of a  business, is the same. Some of them hold portfolios with dozens of  stocks; others concentrate on a handful. But all exploit the  difference between the market price of a business and its intrinsic  value.

I’m convinced that there is much  inefficiency in the market. These Graham-and-Doddsville investors have  successfully exploited gaps between price and value. When the price of  a stock can be influenced by a “herd” on Wall Street with  prices set at the margin by the most emotional person, or the  greediest person, or the most depressed person, it is hard to argue  that the market always prices rationally. In fact, market prices are  frequently nonsensical.

I would like to say one important  thing about risk and reward. Sometimes risk and reward are correlated  in a positive fashion. If someone were to say to me, “I have  here a six-shooter and I have slipped one cartridge into it. Why  don’t you just spin it and pull it once? If you survive, I will  give you $1 million.” I would decline — perhaps stating  that $1 million is not enough. Then he might offer me $5 million to  pull the trigger twice — now that would be a positive  correlation between risk and reward!

The exact opposite is true with value  investing. If you buy a dollar bill for 60 cents, it’s riskier  than if you buy a dollar bill for 40 cents, but the expectation of  reward is greater in the latter case. The greater the potential for  reward in the value portfolio, the less risk there is.

One quick example: The Washington Post Company in 1973 was selling for  $80 million in the market. At the time, that day, you could have sold  the assets to any one of ten buyers for not less than $400 million,  probably appreciably more. The company owned the ''Post'', ''Newsweek'',  plus several television stations in major markets. Those same  properties are worth $2 billion now, so the person who would have paid  $400 million would not have been crazy.

Now, if the stock had declined even  further to a price that made the valuation $40 million instead of $80  million, its beta would have been greater. And to people that think  beta measures risk, the cheaper price would have made it look riskier.  This is truly Alice in Wonderland. I have never been able to figure  out why it’s riskier to buy $400 million worth of properties for  $40 million than $80 million. And, as a matter of fact, if you buy a  group of such securities and you know anything at all about business  valuation, there is essentially no risk in buying $400 million for $80  million, particularly if you do it by buying ten $40 million piles of  $8 million each. Since you don’t have your hands on the $400  million, you want to be sure you are in with honest and reasonably  competent people, but that’s not a difficult job.

You also have to have the knowledge to  enable you to make a very general estimate about the value of the  underlying businesses. But you do not cut it close. That is what Ben  Graham meant by having a margin of safety. You don’t try and buy  businesses worth $83 million for $80 million. You leave yourself an  enormous margin. When you build a bridge, you insist it can carry  30,000 pounds, but you only drive 10,000 pound trucks across it. And  that same principle works in investing.

In conclusion, some of the more commercially minded among you may  wonder why I am writing this article. Adding many converts to the  value approach will perforce narrow the spreads between price and  value. I can only tell you that the secret has been out for 50 years,  ever since Ben Graham and Dave Dodd wrote ''Security Analysis'',  yet I have seen no trend toward value investing in the 35 years that  I’ve practiced it. There seems to be some perverse human  characteristic that likes to make easy things difficult. The academic  world, if anything, has actually backed away from the teaching of  value investing over the last 30 years. It’s likely to continue  that way. Ships will sail around the world but the Flat Earth Society  will flourish. There will continue to be wide discrepancies between  price and value in the marketplace, and those who read their Graham  & Dodd will continue to prosper.

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== Original-Artikel als PDF ==
[[Datei:Superinvestors of Graham- and Doddsville.pdf|mini|Superinvestors of Graham- and Doddsville als PDF.|alternativtext=Superinvestors of Graham- and Doddsville als PDF.]]

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