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University of Auckland Investment Club Bulletin

May 28, 2015 By: webmaster Category: Irving Kahn, Mohnish Pabrai, SuperInvestors, Understanding Value

I just came across the first edition of a newsletter from the University of Auckland Investment Club.  The inaugural issue features a profile of Irving Kahn, Notes from the 2014 Graham and Dodd Breakfast and A Conversation with Mohnish Pabrai.  It is also packed with student pitches, member highlights and more.

Click here to read the First Edition of the University of Auckland Investment Club Bulletin.

Value Investing Community Loses a Legend: Irving Kahn (1905 – 2015)

February 26, 2015 By: webmaster Category: Benjamin Graham, Irving Kahn, SuperInvestors

Irving Kahn, co-founder of Kahn Brothers Group and one-time teaching assistant to Benjamin Graham at Columbia Business School, has died at the age of 109.  I had the opportunity to meet Mr. Kahn in 2012.  I’ll never forget Mr. Kahn’s first words…. a profuse apology for not standing to greet me.  He had fallen on a step and hurt his back.  Irving Kahn, a successful investor who was 106 at the time and still worked in the office 3 – 4 days a week was apologizing for not giving me a proper greeting?!

We had a wonderful lunch.  If I am half as lucid at 80 as he was at 106, I will be a happy man.  More than once during our meeting Mr. Kahn urged me to read Storage and Stability by Benjamin Graham.  Embarrassingly, I never got around to it.  I think Mr. Kahn would happy to know that I just placed an order on Amazon and the book is next in my queue.  We may not all be blessed with as many years as Irving Kahn, but at least we have something and someone to aspire to.

See:  Irving Kahn, Investor Who Profited in ’29 Crash, Dies at 109 (Bloomberg)

See:  Irving Kahn, the world’s oldest investor, dies at 109 (The Telegraph)

See:  Irving Kahn, Wall Street’s oldest stockbroker, dies at 109 (The Washington Post)

See:  The oldest money manager on Wall Street has died at age 109 (Business Insider)

See:  Irving and Tom Kahn Guest Lecture (The Ben Graham Center for Value Investing)

See:  Interview of Irving Kahn (The Ben Graham Center for Value Investing)

See:  Storage and Stability: The Original 1937 Edition by Benjamin Graham with a Forward by Irving Kahn (Amazon)

The Heresy That Made Them Rich – Throwback Thursday #TT

April 03, 2014 By: webmaster Category: Bruce Greenwald, CBS Faculty, Columbia Business School, Jason Zweig, Jean-Marie Eveillard, Mario Gabelli, Paul Sonkin, Roger Murray, SuperInvestors, The Heilbrunn Center for Graham and Dodd Investing

On October 29, 2005 Joe Nocera penned an article for The New York Times called The Heresy That Made Them Rich.

A FEW weeks ago, Columbia Business School held its 15th Annual Graham & Dodd Breakfast. The guest speaker was Jean-Marie Eveillard, a successful (and now retired) mutual fund manager, who used to beat the market regularly by adhering to the ”value investing” principles first articulated by the great investor Benjamin Graham and his co-author, the Columbia professor David L. Dodd, in their 1934 classic, ”Security Analysis.”

“The more things change, the more they stay the same way.”

Still, the Columbia program — and value investing in general — feels a little like a cult. Despite the obvious success of people like Mr. Buffett and Mr. Gabelli — and the studies that seem to bear out that success as something more than luck — it is not yet fully accepted by either mainstream Wall Street or mainstream academia. In his remarks at the breakfast, Mr. Eveillard said he thought that maybe 5 percent of professional money managers are true value investors.

See:  “The Heresy That Made Them Rich” (New York Times, 10/29/05)

 

The Value Gene – Buffett, Klarman and Evolution

December 11, 2012 By: webmaster Category: Behavioral Finance, Benjamin Graham, Security Analysis, Seth Klarman, SuperInvestors, Understanding Value, Warren Buffett

On November 1, 2011, Charlie Rose interviewed Superinvestor Seth Klarman for the Facing History and Ourselves New York Benefit Dinner.  If you have not seen this interview, it is fantastic.

One of my favorite nuggets is the following (see 25:30):

Warren evolved through 3 stages:  He went from buying cigar butts and getting the last few puffs for free, to buying great businesses at really cheap prices, to buying and holding great businesses at so-so prices.  And maybe even this new area of buying weird securities from crappy businesses at better than market prices – like B of A preferred or whatever… I’m still in phase one.  We’re still buying cigar butts, there’s a good business there in buying them and it’s a lot of fun.
Another quote, which really struck a chord (see 22:20):
I think Warren captured the idea himself in his 1964 (sic) article The Superinvestors of Graham and Doddsville and in it he talks about – value investing is like an innoculation – you either get it right away, or you never get it.  And I think it’s just true.  I actually think there’s just a gene for this stuff.  Whether it’s a value investing gene or a contrarian gene.
It seems that researchers are beginning to confirm Klarman’s statement.  This morning, MarketWatch published an article titled The missing link of investing: Science may explain why we trade.

When asked why we trade, many of us would answer with traditional, rational responses. We see an undervalued company. We like a business, a brand or a strategy. Or, it’s the flip side: We’re selling because we may think the fundamentals point to trouble. We see an investment that looks overvalued.

As we know, most people follow the herd.  But what about contrarian investors – the ones featured on this blog – who consistently move against the herd?

It’s what the academics describe as a relatively new intersection of financial economics, psychology, and evolutionary biology including new interpretations of mutation. And the upshot, to me at least, is that we may not be as deliberative as we might think when it comes to trading decisions. In other words, we’re wired to trade a certain way.

According to Andrew Lo of MIT and Thomas J. Brennan of Northwestern claim that science evolution may explain both the herd mentality and also a contrarian one.

In other words, many of us are bound to the pack. A minority of us break away from it.

Both behaviors are necessary from an evolutionary standpoint because they’re necessary for the species to survive.  Every species needs its normal populations and its mutants.

I think I was just called a “mutant.”  I guess if that puts anywhere near the same group as Warren Buffett and Seth Klarman, then I am proud to be a mutant.

Click here to read the entire article The missing link of investing: Science may explain why we trade at MarketWatch.com.

Click here to see An Interview with Seth Klarman and Charlie Rose.

Click here to learn more about Seth Klarman.

Howard Marks: Memos From Our Chairman

November 20, 2012 By: webmaster Category: Howard Marks, SuperInvestors

Howard Marks’ latest memo, A Fresh Start (Hopefully), is now available on the Oaktree website.

Marks’ memos are a must read. If you have what Seth Klarman believes to be the ‘value investing gene’ – you are likely to find yourself nodding yes as you read along.

A compilation of Marks’ memos were recently published in a book called The Most Important Thing. You can also read the originals, which can be found here.

Over the coming days, I will post some older articles by Howard Marks to the SuperInvestor Resources page.  In general, Marks’ clarity makes him a very ‘quotable’ investor.  One of my all-time favorite quotes is:

Certain common threads run through the best investments I’ve witnessed. They’re usually contrarian, challenging and uncomfortable— although the experienced contrarian takes comfort from his or her position outside the herd. Whenever the debt market collapses, for example, most people say, “We’re not going to try to catch a falling knife; it’s too dangerous.” They usually add, “We’re going to wait until the dust settles and the uncertainty is resolved.” What they mean, of course, is that they’re frightened and unsure of what to do.

The one thing I’m sure of is that by the time the knife has stopped falling, the dust has settled and the uncertainty has been resolved, there’ll be no great bargains left . When buying something has become comfortable again, its price will no longer be so low that it’s a great bargain. Thus, a hugely profitable investment that doesn’t begin with discomfort is usually an oxymoron.

It’s our job as contrarians to catch falling knives, hopefully with care and skill. That’s why the concept of intrinsic value is so important. If we hold a view of value that enables us to buy when everyone else is selling—and if our view turns out to be right— that’s the route to the greatest rewards earned with the least risk.”

Have a wonderful Thanksgiving!

Click here for more on Howard Marks.

Superinvestor Arnold Van Den Berg Delivers His Annual Client Review (Updated)

November 02, 2012 By: webmaster Category: Arnold Van Den Berg, SuperInvestors

As a child Arnold Van Den Berg was smuggled into an orphanage to flee the Nazis   After the war, Van Den Berg moved to the United States.  His first job out of school was as a salesman for Capital Research, a mutual fund company.  In 1974, Van Den Berg founded Century Management, based in Austin, Texas.

For the past 38 years, Van Den Berg’s firm has adhered to the classic tenets of value investing as pioneered by Benjamin Graham.  By focusing on the private market value of a business to determine intrinsic value, Van Den Berg and his team set out to uncover securities selling in the open market at a large enough discount from intrinsic value to provide for a sufficient margin of safety.

(That sure sounds easy on paper…  But if it is so easy, why do the majority of professional money managers underperform the benchmarks year after year?)

This video of Century Management’s Annual Client Review, which was held on September 15, 2012, provides a unique and valuable insight into the mind of a true Supeinvestor.


source: http://centman.com/insights/2012/10/play-all-arnold-van-den-berg-keynote-from-the-2012-austin-client-review

For more on Arnold Van Den Berg see  “Profit Guru:  Fair Play” (Outlook PROFIT, 2009)

UPDATE 11/07/2012: I just found this video of a lecture Arnold Van Den Berg recently gave to students at Texas Lutheran University. In this lecture, Mr. Van Den Berg tells his amazing story of how a child who survived the Holocaust grew up to become an American success story and Superinvestor. If this story doesn’t inspire you, then there may not be any hope!