Sunday, November 23, 2014

Living Legends 2

Today, we’re going to take a quick look at four legendary investors nearing the end of storied careers.  I don’t expect any of these gentlemen to retire, per se.  In fact, I would expect all to die in the saddle with their boots on, God willing.  But when these investing legends do eventually leave for that great boardroom in the sky, they will be missed by generations of investors that learned the trade from watching them operate.

Any list of living legends has to start with Warren Buffett.  I hope the Oracle of Omaha lives forever, if for no other reason than I appreciate his wit.  When asked what his plans were after becoming the world’s wealthiest man, his deadpan reply was “to become the oldest.”

Buffett admitted to CNBC’s Becky Quick that buying Berkshire Hathaway was the worst trade of his career, yet he’s managed to do quite well, all things considered.   Buffett has compounded Berkshire Hathaway’s book value at an astonishing 17.9% annualized return over the past 30 years, beating the S&P 500 by 6.8% per year.  Again, that’s over a period of 30 years.

Next on the list is Marty Whitman, founder of Third Avenue Management and lead portfolio manager of the Third Avenue Value Fund (TAVFX) for most of its history.  Like Buffett, Whitman is a noted value investor, though he tends to focus more on “deep value” special situations.   And like Buffett, Whitman has been around for a while; he’s worked in the investment management business for more than 50 years.

Whitman retired from full-time management of the Third Avenue Value Fund in 2012, though he remains active in his company and as opinionated as ever. His letters to investors are as entertaining as they are insightful; if you are a student of finance, I recommend you spend a few days browsing them (see letter archive).

My enduring memory of the 78-year-old Carl Icahn will always be his manhandling of fellow activist investor Bill Ackman live on CNBC over Ackman’s Herbalife (HLF) short.  At one point, Icahn called Ackman a schoolyard crybaby.

Icahn isn’t the warm, grandfatherly type like Warren Buffett.  He’s kind of a mean old man, to be honest.  But he’s a hard-nosed, no-nonsense investor with a reputation for fixing broken companies. He’s also a natural contrarian. In his own words, “The consensus thinking is generally wrong. If you go with a trend, the momentum always falls apart on you. So I buy companies that are not glamorous and usually out of favor. It is even better if the whole industry is out of favor.”

Irving Kahn has seen it all.  At 108 years old, his career predates the Great Depression.  In fact, he made his first trade—a short sale of a copper mining company—in the summer of 1929, was just months before the Great Crash.  Like Warren Buffett, Kahn studied under Benjamin Graham, the father of value investing as a discipline.  He was also one of the first professionals to earn the CFA designation.

If I am lucky enough to still be alive at 108, I probably won’t still be running money.  Frankly, it’s a stressful job.  The fact that Kahn is still actively managing portfolios is testament both to incredible genes and to the emotional detachment he brings to his value investing methodology.

Per the Kahn Bother’s website,

Kahn Brothers thinks of a portfolio as an orchard of fruit trees. One cannot expect fruit every year from each species of tree. Investments can and often do have varied and unpredictable timetables to maturity. We believe a suitable time horizon for investment fruit to ripen for harvest can be three to five years or longer. Indeed, a key factor in realizing outstanding performance is having the discipline and patience to maintain time-tested principles and not abandon the orchard before the fruit has ripened.

At 108 years old, Kahn has no doubt learned a thing or two about patience.

And finally, we come to the granddaddy of macro hedge fund traders, George Soros.

Soros’ investment returns were the stuff of legend.  In its heyday between 1969 and 2000, Soros’ Quantum Fund generated annual returns in excess of 20% per year.

Soros will be forever remembered as the man who broke the Bank of England—and as the man who pocketed nearly $2 billion in a single day shorting the pound.

[so I count five, not four.  I guess that's what the headline of the article counted too.]

Labels: ,

0 Comments:

Post a Comment

<< Home