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Wednesday, 19 September 2012

The top 10 Value Investors in the world

The Super Investors of Graham-and-Doddsville & beyond…

In 1954 Warren Buffett gave a speech at Columbia Business School at a seminar marking the 50th anniversary of the publication of Benjamin Graham and David Dodd’s Security Analysis. His speech, titled ‘The Superinvestors from Graham-and-Doddsville,’ focused on the extraordinary success achieved by a group of value investors. 

Prior to the publication of Graham and Dodd’s Security Analysis in 1934, the definition of an investor was practically equal to that of a speculator. Graham and Dodd’s work lay down an approach to investing which influenced a group of people of whom some became The Superinvestors.
Some of the greatest (first generation) value investors worked for or with Benjamin Graham. Others attended Columbia Business School, taking courses with either Graham or his successors. 

The second generation mentioned here, in turn, worked for or with some of the first generation. The world of value investing extends far beyond the group portrait of people here.Similarly, the styles of value investing have diverged since 1934. For instance, some value investors profiled here only invest in superior businesses that they intend to own for decades.

Others are looking for damaged goods discarded by the markets, even though the assets or businesses are still worth something. Finally, there are many great value investors not mentioned here, they include the late Max Heine, manager of Mutual Shares, John Neff, Charles Royce, and many others.
Warren Buffett
Few will dispute the claim that Warren Buffett is the most illustrious investor ever. The exceptional returns he has earned for his shareholders over more than four decades speak for themselves. The ‘Oracle of Omaha’, as he is known, achieved a 21.4% compound annual per-share book value gain between 1965 and 2006. Buffett’s key approach is that as investor and businessman he looks at ownership in exactly the same way. He always focusses on the business and the management to understand intrinsic value. Ask him and he’ll say that he simply buys great companies at good prices.
Glenn Greenberg
Greenberg studied English Literature, but after an MBA at Columbia University he took a position at J.P. Morgan. Greenberg and John Shapiro founded Chieftain Capital Management in 1984. By pursuing a disciplined investment strategy, Chieftain compounded its accounts at 22.5% during the period from 1984 to 2004, versus 12.9% for the S&P 500. Chieftain maintained a highly concentrated portfolio with no more than 15 to 17 shares in its entire portfolio at all times.
Seth Klarman
He started his career as an intern at the Mutual Shares Corporation that was managed by Max Heine and Michael Price. In 1982 Seth Klarman founded the Baupost Group with an initial investment of $27m from four wealthy and prominent Boston-based families. Today, after an astounding gross return of 20% per year and only one negative year, the group boasts assets of $24bn and places among the top ten hedge funds both in size and long-term returns. Klarman invests in a wide array of investments ranging from fairly traditional value stocks to more esoteric investments like distressed debt, liquidations, and foreign equities or bonds.
Mario Gabelli
He graduated from Columbia Business School in 1967. After ten years on Wall Street he founded Gabelli Asset Management in 1977. Today the firm is a global investment fund that manages in excess of $30bn in mutual funds, separate accounts for individuals and institutions, and private investment partnerships. Gabelli, who established the term and approach called ‘Private Market Value,’ based on traditional Graham principals, follows a diversified approach with more than 600 shares in his GAMCO Investors portfolio.
Michael Price
He started working for Max Heine in 1975. After Heine died in 1988 Price took over Heine Securities. Price earned a reputation as an activist value investor, similar to Carl Icahn. He buys undervalued companies and then gets involved in fixing them, where he often tussles with management of companies held in his portfolios. He sold Heine Securities in 1996 to Franklin Resources and now he manages the private firm MFP Investors.
Peter Lynch
Lynch graduated from Boston College in 1965 with a degree in finance. After completing an MBA in 1968 he started working at Fidelity Investments as an investment analyst. In 1977 Lynch was named manager of the little known Magellan Fund. He managed the fund from 1977 to 1990 (when he retired), during which time the fund's assets grew from $20m to $14bn. More importantly, Lynch beat the S&P 500 Index benchmark in 11 of those 13 years, achieving an annual average return of 29%. He is known as a growth value investor and the recognised author of a number of value investing books.
Joel Greenblatt
Greenblatt graduated from the University of Pennsylvania in 1979 and [became] an MBA in 1980. In 1985 he started the hedge fund Gotham Capital with $7m. Greenblatt is a value investor that buys (as he calls it) ‘cheap and good companies’ with a high earnings yield and a high return on invested capital. He keeps his portfolio very concentrated and buys at deep discounts to intrinsic value. He is also a value investor author and now Adjunct Professor at Columbia Business School.
Walter and Edwin Schloss
Walter Schloss was a well-regarded value investor, a notable disciple of the Benjamin Graham. He took class from Graham and later worked for him at Graham-Newman. He started his own limited partnership in mid-1955. He, and now his son Edwin, follow the ‘keep it simple and cheap’ approach to investing as originally defined by Bejamin Graham. Walter Schloss raked up an impressive return averaging a 15.3% compound return over the course of five decades in his fund.
Ed Lampert
After Lampert graduated from Yale in 1984 he started at Goldman Sachs. With $28m in seed money he founded ESL Investments in 1988. Lampert's investment style can best be described as ‘concentrated value’, often focusing on the retail sector. He typically holds his investments for several years and usually has between three and fifteen stocks in his portfolio. Since starting ESL Investments he has racked up returns averaging 29% a year.
Todd Combs
Todd graduated in 1993 from Florida State University and completed a course at Columbia Business School in 2002. In 2005 he started Castle Point Capital and achieved a reported compound annual return between 2005 and 2010 of 34%. In 2010 Warren Buffett tapped Combs to (possibly) eventually replace him as chief investment officer at Berkshire Hathaway.

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