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In a 1984 speech Warren Buffett set out the performances of some of his fellow value investors – those strongly influenced by Benjamin Graham (
The Superinvestors of Graham-and-Doddsville, Warren Buffett’s speech at COLUMBIA BUSINESS School, May 17, 1984
https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors).
I’ve reproduced the second half of the speech below.
“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.
WALTER SCHLOSS
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.”
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.
| TABLE 1 – Walter J. Schloss | |||||||||||
| Year | S&P Overall Gain, Including Dividends (%) | WJS Partners Overall Gain per year (%) | WJS Partnership Overall Gain per year (%) | ||||||||
| 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 | ||||||||
| 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% |
| 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. | |
TOM KNAPP
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 2 – Tweedy, Browne Inc. | |||||||||||
| Period Ended (September 30) | Dow Jones* (%) | S & P 500* (%) | TBK Overall (%) | TBK Limited Partners (%) | |||||||
| 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 | ||||||||||
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