A super investor, anointed thus by none other than the world's greatest investor himself, Warren Buffett, Schloss' life is a fine example of how deep value can survive amidst all the noise of the smart money, the fast money, the quants and the chartists
08-Jun-2015
Schloss was a direct student of Benjamin Graham and is one of the 'Super Investors' mentioned by Warren Buffett in his famous essay, 'The Super Investors of Graham-and-Doddsville'.
According to Schloss, the lows of the stock price over the last couple of years give a good idea of where the stock can land in case of a weakness. Conversely, the highs of the past can indicate the level of fall the stock has seen. And it is always better if the management owns a lot of stocks; not to forget that the management's reputation is a deal breaker. Holding period should range between four to five years as depressed stocks can take time to turn around.
Methodical, value-based investor Schloss famously summed up his investment philosophy in one sentence: "We buy cheap stocks." He followed a Graham-style value approach to investing throughout his career and rarely talked to the management, choosing to invest only on the basis of numbers. Specifically, he liked to look at the assets (book value) more than the income statement. He liked to buy stocks at low price- to-book ratios, and when he did look at earnings, he liked low price-to-normalised earnings.
He liked stocks with long (15-20 years) histories and track records and studied how earnings and asset values fluctuated over various cycles.
Schloss never liked losing money and owned his stocks for an average of four years and often owned 60 stocks or more at a time and sometimes as many as 100 because he claimed not to be a good judge of business trends or management capability. So, he needed to take a diversified approach.
Timeless principles
Schloss's starting point was to look for the companies below the book value and with little debt. He would be interested only in companies that engaged in manufacturing of some sort. He was not comfortable with the service industry and would even ignore such successful franchises as McDonald's restaurants. He was interested in companies in basic industries.
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