The Wall Street Journal asked six celebrated mutual-fund managers, who have mostly beaten the Standard and Poor's 500-stock index for 10 years, what they are doing to weather the storm and prepare for an eventual rebound.
These managers -- from the growth-oriented Tom Marsico to value maven Wally Weitz -- are mostly sticking with what they know, adding to positions they already own at cheap prices.
"When you've owned a company like Liberty Media for 15 years, and you can talk to management about what's real and what's not, it's a lot easier in a crisis to buy," says Mr. Weitz, whose Weitz Value fund has gained 3.1% a year for the past decade, far outpacing the annualized loss of 0.2% on the S&P 500.
Read the full article
Friday, November 14, 2008
Wednesday, November 12, 2008
Legg Mason: Our managers on the markets
The third quarter of 2008 will be remembered as one that forever
altered the landscape of the U.S. financial system — through the
nationalization of Fannie Mae and Freddie Mac, the seizure of AIG
by the federal government, the conversion of Goldman Sachs and
Morgan Stanley into bank holding companies, and the downfalls
of Lehman Brothers, Washington Mutual and Wachovia. All of
these events were consequences of the bursting of the massive
credit bubble in the U.S. banking system and the spillover from the
significant slowdown in housing that escalated last year.
In these uncertain times, we believe that the insights of industry
veterans who have seen the ups and downs of multiple market
cycles can provide valuable perspective, as we seek to understand
the complex issues facing the economy and capital markets. In this
issue of Briefly Speaking, key portfolio managers and investment
strategists of Legg Mason’s affiliated investment managers offer their
perspective on these unprecedented events, views on the markets,
and strategies for managing assets in their specific area of expertise.
Read the full article
altered the landscape of the U.S. financial system — through the
nationalization of Fannie Mae and Freddie Mac, the seizure of AIG
by the federal government, the conversion of Goldman Sachs and
Morgan Stanley into bank holding companies, and the downfalls
of Lehman Brothers, Washington Mutual and Wachovia. All of
these events were consequences of the bursting of the massive
credit bubble in the U.S. banking system and the spillover from the
significant slowdown in housing that escalated last year.
In these uncertain times, we believe that the insights of industry
veterans who have seen the ups and downs of multiple market
cycles can provide valuable perspective, as we seek to understand
the complex issues facing the economy and capital markets. In this
issue of Briefly Speaking, key portfolio managers and investment
strategists of Legg Mason’s affiliated investment managers offer their
perspective on these unprecedented events, views on the markets,
and strategies for managing assets in their specific area of expertise.
Read the full article
Tuesday, November 11, 2008
Bruce Greenwald on Value Investing
Bruce Greenwald, who holds the Robert Heilbrunn Professorship of Finance and Asset Management at Columbia Business School, is coeditor of the forthcoming sixth edition of the value investing classic Graham and Dodd's Security Analysis (McGraw Hill).
After watching stocks plummet this year, he's sizing up the opportunities seen through the lens of value greats like Warren Buffett who perceive a rare chance to start buying on the cheap. Excerpts:
What's the current environment like for a value guy?
I'll tell you the one really nice reason to be a value investor: When things like this happen, you cannot help but go nuts at the opportunity. What this looks like is the end of 1974, where good stocks are selling at three times sustainable earnings and stocks that normally wouldn't have sold at less than 20 times earnings are selling at 10 times earnings. These are exciting times. The short-term issue is that in the near term there will be a painful macroeconomic environment and we don't know how long it will last.
Read the full article
After watching stocks plummet this year, he's sizing up the opportunities seen through the lens of value greats like Warren Buffett who perceive a rare chance to start buying on the cheap. Excerpts:
What's the current environment like for a value guy?
I'll tell you the one really nice reason to be a value investor: When things like this happen, you cannot help but go nuts at the opportunity. What this looks like is the end of 1974, where good stocks are selling at three times sustainable earnings and stocks that normally wouldn't have sold at less than 20 times earnings are selling at 10 times earnings. These are exciting times. The short-term issue is that in the near term there will be a painful macroeconomic environment and we don't know how long it will last.
Read the full article
Wednesday, November 5, 2008
Legg Mason's Mauboussin: Buy Stock Now
• We are in the midst of a collateral-based financial crisis.
• The conditions are getting set for attractive long-term returns in a number of
asset classes, including equities.
• We draw reassurance from Warren Buffett’s recent comments. Buffett rarely
makes unsolicited calls on the market, and tends to be prescient when he
does.
Read the full article
• The conditions are getting set for attractive long-term returns in a number of
asset classes, including equities.
• We draw reassurance from Warren Buffett’s recent comments. Buffett rarely
makes unsolicited calls on the market, and tends to be prescient when he
does.
Read the full article
David Winters: Getting Super Values on Great Companies
David Winters is as bullish as I've ever heard him. At 46, he has been managing money half his life, but he's never seen values like this. "People are selling excellent companies at whatever prices they can get because they're afraid or because they need the cash," he says. "The opportunities are unprecedented for a long-term investor."
Winters is a canny veteran. Schooled for two decades at the Mutual Series funds (now owned by Franklin Templeton), where he started as an analyst under legendary value investor Michael Price and rose to become chief investment officer, Winters left to launch Wintergreen fund (symbol WGRNX) in 2005. The global fund has beaten the MSCI World stock index by a comfortable margin since its inception in October 2005. Although the fund plunged 34% in 2008 through October 31, it was ahead of the index by nearly six percentage points.
Because Winters buys stocks only when they're cheap, his holdings usually have some warts. Not today. "Everything is for sale, so we can shop at Tiffany's instead of some budget store," he says. "There's been almost no place to hide this year; even the highest-quality stocks have gone down."
In analyzing stocks, Winters looks for good businesses selling at favorably cheap prices and run by good managers whose interests are aligned with those of shareholders. "We've been through an extraordinary period that is now handing us these companies on a platter," says Winters.
Read the full article
Winters is a canny veteran. Schooled for two decades at the Mutual Series funds (now owned by Franklin Templeton), where he started as an analyst under legendary value investor Michael Price and rose to become chief investment officer, Winters left to launch Wintergreen fund (symbol WGRNX) in 2005. The global fund has beaten the MSCI World stock index by a comfortable margin since its inception in October 2005. Although the fund plunged 34% in 2008 through October 31, it was ahead of the index by nearly six percentage points.
Because Winters buys stocks only when they're cheap, his holdings usually have some warts. Not today. "Everything is for sale, so we can shop at Tiffany's instead of some budget store," he says. "There's been almost no place to hide this year; even the highest-quality stocks have gone down."
In analyzing stocks, Winters looks for good businesses selling at favorably cheap prices and run by good managers whose interests are aligned with those of shareholders. "We've been through an extraordinary period that is now handing us these companies on a platter," says Winters.
Read the full article
Thursday, October 30, 2008
Channeling Graham and Dodd: A Conversation with Seth Klarman
Early in the process of defining how to update Graham and Dodd’s Security Analysis, the acknowledged “bible of value investing,” lead editor Seth Klarman and his assembled team abandoned any notion of editing the text of 1940’s second edition. “It would have taken a decade to rewrite, with absolutely no assurance we could have improved upon it anyway,” he says.
Instead, Klarman assembled a who’s who of prominent value investors – including Glenn Greenberg, David Abrams, Howard Marks and Thomas Russo – to write introductory commentary to each of the book’s sections, drawing out the timeless wisdom in the original text and combining it with additional insight and examples relevant to today’s market.
In the September 30 edition of Value Investor Insight, Klarman described this process. Key excerpts follow:
Why take on what was surely a time-consuming role with this book?
Seth Klarman: First of all, it was an honor to be asked and I don’t think one says “no” lightly to something like that. But on top of that, I feel a huge amount of loyalty to Graham and Dodd. Their thinking has influenced mine right from the beginning, so what could be more of an honor – and more of a responsibility – than to contribute to updating their work?
What tenets of Graham and Dodd have most influenced you as an investor?
SK: I think Graham and Dodd’s writing is not actually about investing, but about thinking about investing. Any book can say, “Buy stocks that fit the following criteria,” but Graham and Dodd go beyond that to fully explain why. It’s like the difference between being able to divide two numbers using a calculator and actually knowing long division. A Graham and Dodd investor understands both the numbers and the concepts behind the numbers. In a world in which most investors appear interested in figuring out how to make money every second and chase the idea du jour, there’s also something validating about the message that it’s okay to do nothing and wait for opportunities to present themselves or to pay off. That’s lonely and contrary a lot of the time, but reminding yourself that that’s what it takes is quite helpful.
Warren Buffett is right when he says you should invest as if the market is going to be closed for the next five years. That’s particularly relevant right now – who knows, that might be the next thing the government does! The fundamental principles of value investing, if they make sense to you, can allow you to survive and prosper when everyone else is rudderless. We have a proven map with which to navigate. It sounds kind of crazy, but in times of turmoil in the market, I’ve felt a sort of serenity in knowing that if I’ve checked and re-checked my work, one plus one still equals two regardless of where a stock trades right after I buy it.
Read the full article
Instead, Klarman assembled a who’s who of prominent value investors – including Glenn Greenberg, David Abrams, Howard Marks and Thomas Russo – to write introductory commentary to each of the book’s sections, drawing out the timeless wisdom in the original text and combining it with additional insight and examples relevant to today’s market.
In the September 30 edition of Value Investor Insight, Klarman described this process. Key excerpts follow:
Why take on what was surely a time-consuming role with this book?
Seth Klarman: First of all, it was an honor to be asked and I don’t think one says “no” lightly to something like that. But on top of that, I feel a huge amount of loyalty to Graham and Dodd. Their thinking has influenced mine right from the beginning, so what could be more of an honor – and more of a responsibility – than to contribute to updating their work?
What tenets of Graham and Dodd have most influenced you as an investor?
SK: I think Graham and Dodd’s writing is not actually about investing, but about thinking about investing. Any book can say, “Buy stocks that fit the following criteria,” but Graham and Dodd go beyond that to fully explain why. It’s like the difference between being able to divide two numbers using a calculator and actually knowing long division. A Graham and Dodd investor understands both the numbers and the concepts behind the numbers. In a world in which most investors appear interested in figuring out how to make money every second and chase the idea du jour, there’s also something validating about the message that it’s okay to do nothing and wait for opportunities to present themselves or to pay off. That’s lonely and contrary a lot of the time, but reminding yourself that that’s what it takes is quite helpful.
Warren Buffett is right when he says you should invest as if the market is going to be closed for the next five years. That’s particularly relevant right now – who knows, that might be the next thing the government does! The fundamental principles of value investing, if they make sense to you, can allow you to survive and prosper when everyone else is rudderless. We have a proven map with which to navigate. It sounds kind of crazy, but in times of turmoil in the market, I’ve felt a sort of serenity in knowing that if I’ve checked and re-checked my work, one plus one still equals two regardless of where a stock trades right after I buy it.
Read the full article
Wednesday, October 29, 2008
Warren Buffett: The economy works
Shortly after the Dow began its tumble Wednesday, investor Warren Buffett told a packed Long Beach Arena that he has moved 100 percent of his personal portfolio from government securities to stocks.
Buffett, speaking to California first lady Maria Shriver's Women's Conference in Long Beach, said he has no idea what will happen in the coming two years but was confident that over a 10-year span the stock market would outperform cash-based investments, such as certificates of deposits and savings accounts, which can lose value when inflation is subtracted from gains.
Investors have been rushing into the relative security of cash to shield themselves from wild market fluctuations, but the world's most respected investor warned against trying to time the market by pulling out now and jumping back in when indexes begin to rise.
Buffett, whose motto is to be fearful when others are greedy and greedy when others are fearful, said the 20th century saw the Great Depression, two world wars and multiple bear markets, but the Dow still managed to finish more than 10,000 points above where it began.
"This country works," Buffett said to generous applause from an audience of women leaders in government, business, education and other sectors. "It gets gummed up from time to time, the economy, but it works."
Read the full article
Buffett, speaking to California first lady Maria Shriver's Women's Conference in Long Beach, said he has no idea what will happen in the coming two years but was confident that over a 10-year span the stock market would outperform cash-based investments, such as certificates of deposits and savings accounts, which can lose value when inflation is subtracted from gains.
Investors have been rushing into the relative security of cash to shield themselves from wild market fluctuations, but the world's most respected investor warned against trying to time the market by pulling out now and jumping back in when indexes begin to rise.
Buffett, whose motto is to be fearful when others are greedy and greedy when others are fearful, said the 20th century saw the Great Depression, two world wars and multiple bear markets, but the Dow still managed to finish more than 10,000 points above where it began.
"This country works," Buffett said to generous applause from an audience of women leaders in government, business, education and other sectors. "It gets gummed up from time to time, the economy, but it works."
Read the full article
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