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On This Day - Jun 17, 2017
Walter Schloss

We've written before to some of our subscribers about one Mr Walter Schloss. If you haven't heard of him before, here's the best introduction I can give you...

If you'd invested Rs 100 in the S&P 500 at the start of 1956, a little under three decades later, in 1983, that money would have turned into Rs 987...including the dividends that you got along the way.

That's almost ten times your money. Not bad, eh?

However...if you'd given that Rs 100 to Walter Schloss instead, by 1983, that Rs 100 would have become Rs 23,205.


Here's how it panned out...

He worked at Graham-Newman - Benjamin Graham's money management firm - but left in 1955 and immediately started managing money on his own. Still based on Graham's techniques, of course.

And those were the results he got.

Considering those returns were the result of 28 years of stock picking...in hundreds-and-hundreds of different stocks...you can be sure his success was no stroke of luck. In a market full of one-hit-wonders, Schloss obviously had a formula that worked. Through the thick-and-thin of the market.

Here's Schloss on his investing philosophy:

  • Most look at earnings and earnings potential. Well, I can't get into that game.

    I like to buy basic businesses, not high flyers that sell at huge multiples.

    I'm not very good at judging people. So I found that it was much better to look at the figures rather than people.

    We don't own stocks that we'd never sell. I guess we are a kind of store that buys goods for inventory (stocks) and we'd like to sell them at a profit within four years if possible.

It's also important to note that Schloss used no connections or access to company managements. He just looked up company numbers in the manuals available at the time. He was far less interested in the underlying nature of the business and far more interested in the quantitative attractiveness of a stock.

Walter Schloss seems to have had a strong aversion to loss. Which is probably why he stuck so closely to Graham's principle of margin of safety.

In the end, Waler Schloss identified securities that sell at considerably less than their value...

And that's all he did.

All he thought of was: 'If a business is worth a dollar and I can buy it for 40 cents, something good may happen to me.'

And he did it over and over and over again.

Schloss' unconventional perspectives on investing are very insightful for today's investors...and quite unlike how most on Dalal Street think.

Editor's Note: If Schloss' mantras seem to have an uncanny resemblance to the principles behind Microcap Millionaires (MCM), it's because MCM is also directly inspired by Graham's prescriptions. It's not exactly how Schloss did his investing, which is a good thing. But this very quantitative, deep-value style of value investing is also behind MCM's impressive track record.

Data source: The Superinvestors of Graham and Doddsville by Warren Buffett

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