You probably haven’t heard much of Walter Schloss.
He was a former colleague of Warren Buffett at Graham and Newman Corporation during 1950′s.
Despite his outstanding record, he remained low key for years. He has returned 15%, net of fees to investors in 5 decades versus 10% for the S&P 500.
What is more amazing is how he achieved his outstanding record. His laid back approach to investing could cause a cheer for passive investors.
He has never owned a computer and looks at the prices of stock from the daily newspaper. A lot of the financial information he gets came from Value Line and annual reports sent to him by the company.
Amazing, isn’t it?
I’ll list down the things I have learned from Walter Schloss. Although I must say I don’t really practice his approach to investing:
1. Keep it simple. I guess his investment process is similar to Ben Grahan where he uses a checklists to fill on a daily basis. He goes to work before the market opens. Then, he reads his daily newspapers to look at the prices and news. He buys 100 stocks with an equal weighting on his portfolio and based on the checklist that he has. He sells his stocks when they have gone up or they have not moved in the past 3 years. He goes home by 4 in the afternoon before the market closes.
2. Keep the costs low. He’s always on the look out for costs. He never hired research assistants. He shared office with broker Tweedy Browne during his entire career. His major expenses would probably include a type writer (for his partners letters) and supplies.
3. Know your limitations. He admits that he no special skill in assessing management. He doesn’t attend analyst briefings. He doesn’t speak to the company’s management. He based his investment decisions on what he thinks he’s good at: buying stocks when they fall below the value of assets. He buys many of those stocks and they served him well during the 5 decades he invested.
4. Stick to your investment philosophy. Unlike Warren Buffett, he followed Ben Graham’s investment methods very well. He treated it as gospel truth. He buys stocks that falls below net-net working capital or book value. He never bothered to look at the business prospects of the company.
He has provided us with 16 rules of investing, which we could post in our home and office walls. This is particularly useful if you feel the urge to deviate from your philosophy after having bad runs in the stock market.
At 95, he’s still managing his money and looking for cheap stocks. Talk about loving what you do.
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Here’s some of Walter Schloss articles online that might interest you:
Criteria for Liquidations Where Money is Held by Company
Walter Schloss: 65 on Wall Street
Investing Tips from Walter Schloss
Factors needed to make money in the Stock Market
Yes – you can beat the market with value
There’s a lot more but I think the links above should give you an overview of the process of Walter Schloss. If you have more articles about him, please send me an email. I would be very happy to update this article.