Why did I get into value investing?
Easy. Warren Buffett.
Yes, the logic and strategy of a long-term, value investing approach made sense to me, and I was drawn to the unemotional methodology of stock selection; but at the end of the day it was Buffett who won me over with his impressive results.
Warren Buffett is an idol to many and justifiably so. And while he may be the most well-known, he certainly isn’t the only savvy value investor worth admiring.
The last century witnessed the birth and successes of a few brilliant investors, which makes it difficult to pick only one as your hero. With this article, I would like to pay tribute to the investors that we at STRIDE regard as the elite, the crème de la crème, by sharing a bit of their history and individual investment styles.
After graduating from the University of Manitoba in Canada, Dreman worked as director of research for Rauscher Pierce. 1977 saw the birth of Dreman Value Management Inc., his first investment firm where he served as president and chairman.
Dreman turned to a contrarian strategy after learning from costly mistakes made in the past. He once said, “I invested in the stocks du jour and lost 75% of my net worth." These errors in judgement taught him a valuable lesson about following the herd, one that inspired him to become a contrarian investor.
John Templeton was born into a poor Tennessee family in 1912. He graduated top of his class at Yale University with a degree in Economics, and went on to obtain a Master of Arts in Law.
His first success was co-founding a highly lucrative investment firm. After selling the firm, he continued to create some of the world’s largest and most successful international investment funds. Templeton achieved 'billionaire' status from being a pioneer of globally diversified mutual funds.
His investing style can be summed up as a diversified and contrarian value investing approach. He bought low and sold high. His investing mantra was “search for companies around the world that offered low prices and an excellent long-term outlook.”
After working at the National City Bank as a security analyst for eight years, John joined the Wellington Management Co. in 1964 as a portfolio manager. His average annualised return rate showed great consistency, beating the market year after year. He held a record of outperforming the S&P 500 index 22 times during his 31 years at the company. Many fund managers recognised his gift and entrusted him with their money. He was considered the “professional’s professional”.
John Neff’s investment style is characterised by an approach focused on buying respectable companies, in good industries, at low price-to-earnings prices. Although John wasn’t in favour of the label, his career shows that he applied an approach similar to that of a value-contrarian investor.
With a degree in economics and experience as a treasurer for the J.E Baker Co, Bill Miller joined Legg Mason in 1981 where he secured the position of chairman and chief investment officer in 2007.
Bill Miller owns the title of one of the longest winning streaks in mutual fund history. Between 1991 and 2005, the Legg Mason Value Trust fund, under Bill’s management, beat the S&P 500 for 15 consecutive years.
Bill is a typical value investor but has a slightly different definition of the strategy. He believes that any stock can be a value stock if it trades at a discount to its intrinsic value.
As a result of his father's passing and the subsequent financial struggles his family endured, Benjamin Graham was, from a young age, preoccupied with achieving financial security. After graduating from Columbia University in 1914, Graham immediately started working for a Wall Street firm as a messenger.
By 1920, a mere six years later, he'd worked his way up to partner. Another six years on and Graham formed an investment partnership with Jerome Newman, and started lecturing in Finance at Columbia. Their partnership prospered, boasting an average annual return of 17%.
Value investing through the eyes of Graham meant that any investment had to be substantially worth more than its price, leaving a decent margin of safety. He was a firm believer in the power of fundamental analysis, and only searched for companies with strong balance sheets, those with little debt, above-average profit margins and sufficient cash flow. Read the 20 top Benjamin Graham quotes here.
Moved and inspired by Benjamin Graham's "The Intelligent Investor", Warren Buffett - a then Bachelor of Science graduate - wanted nothing more than to study under his mentorship. And he did so, resulting in him obtaining his Master of Science Degree in Business in 1951.
Post-graduation, Buffett and Graham formed a relationship that landed Buffett a job as a security analyst at Graham’s firm, Graham-Newman Corporation. Working side-by-side with Graham for two years formed the foundation of Buffett’s successful approach to investing.
He went on to create a profitable family business, which allowed him to acquire an unprofitable textile company, Berkshire Hathaway. He transformed the company, changing its financial framework into a holding company for investments. In the 1973-74 market collapse, Buffett went on a buying spree, purchasing companies at bargain prices.
Warren Buffett’s investing style can best be described as a disciplined, patient approach to value investing that has been consistently outperforming the market for decades. Buffett only invests in wonderful companies trading at a discount to their intrinsic value.
We thank these value investing gurus for laying the foundation and pointing the way forward. Their careers are inspirational to all aspiring value investors, showing us that a combination of thorough research, education, fundamental analysis, patience and discipline can turn you from a zero into a value investing hero.
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