Financial History 139 (Fall 2021) - Page 31

Bob Wyckoff of Tweedy , Browne Company remembers Walter Schloss as “ a wonderful , kind and thoughtful friend and colleague . He shared office space with us for what had to be well over 50 years . Edwin has continued to share space with us since his passing … they were both treasured members of the Tweedy , Browne family and adored by all at the firm .” Wyckoff goes on to remember Walter ’ s striking generosity , “ high energy and his complete independence when it came to making decisions about stocks . He really didn ’ t seem to care what stocks other value investors were buying , even his old friend Warren . He had his own unique way of doing things — seems to be a theme with highly successful investors .”
Will Browne of Tweedy , Browne considers Walter Schloss to be “ an extraordinary practitioner of the concept of value investing and his decades-long record is irrefutable proof . His approach was tilted toward asset type business , but that was most likely a function of the period in which Walter was most active . I think he understood intuitively the ideas that were the basis of behavioral finance and how they could play havoc with good judgment and that perhaps fortified his ability to lean against the wind .”
John Spears of Tweedy , Browne remembers Walter ’ s sense of humor . “ If one of his stocks was going down , he would joke that ‘ I can ’ t take the pressure .’ He marched to his own drummer . He was also very frugal , living simply , below his means . He always took the subway to work . He liked to lean against the wind , by buying more and more shares in a company as the stock price declined .” Two examples were Hudson Pulp & Paper and Mercantile Stores . Each resulted in large gains for the fund .
Above all , Will Browne recalls Walter ’ s “ integrity as a person and a fiduciary before that was commonly spoken about . I will always remember my father ’ s [ Howard Browne , co-founder of Tweedy , Browne ] admonition on his retirement , ‘ if you ever get in an argument with Walter , you are wrong ; there is no finer person in the business .’ A life well lived and worth emulating .”
In retirement , Walter continued to invest for his family , as well as serve on the Board of Directors of Freedom House , which monitors democracies around the globe . His wife , Louise , died in 2000 . A year later , he married Ann Pearson , who he met on a retirement tour to France . They traveled together extensively around the world until Walter ’ s passing in 2012 .
Walter Schloss passed away on February 19 , 2012 , at the age of 95 , from leukemia . His personal and professional values have been carried on by his son and partner , Edwin W . Schloss .
Observations by Edwin Schloss
In a recent interview , Edwin recalled that Walter was similar to Graham in that both were negatively impacted in their youth by financial losses in their families . This made them both very conservative investors . He was also similar to Buffett in his overwhelming bullishness on America .
Walter was a contrarian who bought early in a business cycle . “ He often said that their portfolio resembles a department store which buys an inventory of winter coats in the spring for sale in the fall .”
Edwin also commented that the market environment has changed substantially since he and Walter closed the partnership in 2002 . Some companies with seemingly attractive price / book or price / earnings ratios may be “ value traps .” It all depends on the dynamics of each industry , some of which , like retail , are being disrupted by advances in technology .
Nevertheless , he noted that the core principles of value investing are alive and well . As Buffett stated in his “ Superinvestors ” lecture , “[ These ] investors simply focus on two variables : price and value .”
Through 2002 , when they completed the liquidation of the fund , Walter & Edwin Schloss Associates earned a 20.5 % annual gross return before profit sharing fees for 47 years , versus 22.2 % for 37 years at Berkshire Hathaway .
As they neared the end of their partnership , Walter reminisced about their long-term performance record noting that “ we would have done better if we just had bought Berkshire Hathaway stock and held on .” Edwin reluctantly agreed but noted that “ we would not have had so much fun !”
James Russell Kelly is Director of the Gabelli Center for Global Security Analysis at Fordham University and a senior lecturer in finance .
Sources
Buffett , Warren . “ The Superinvestors of Graham-and-Doddsville .” Hermes : 4 – 15 . 1984 .
Buffett , Warren . Personal correspondence to the Lantana Group . April 5 , 1994 .
“ Donor Spotlight : Meet Edwin Schloss .” Van Wezel Foundation . June 18 , 2020 .
Elevation Capital . The Walter Schloss Archives . https :// www . walterschloss . com .
Interviews with Will Browne , Frank Hawrylak , Edwin Schloss , John Spears and Robert Wyckoff . July 2021 .
The Money Men . “ Making Money out of Junk .” Forbes . August 1973 .
“ NYSSA Honors Walter Schloss .” NYSSA News , Nov . 2006 .
Rabinowich , Eli . “ Going out on Top : Walter & Edwin Schloss .” Heilbrunn Center for Graham & Dodd , Profiles in Investing . The Bottom Line : The Newspaper of the Columbia Business School , 17 April 2003 .
Schloss , Walter . “ Benjamin Graham and Security Analysis : A Reminiscence .” Reproduced from private writings ( 1976 ). In The Rediscovered Ben Graham : Selected Writings of the Wall Street Legend , ed . Janet Lowe ( New York : Wiley , 1999 ), 1 – 4 .
Schloss , Walter . Columbia Business School , Upper-Level Seminar in Value Investing . November 17 , 1993 .
Schloss , Walter . “ Sixty-Five Years on Wall Street .” Grant ’ s Interest Rate Observer . Fall Investment Conference . 1999 .
Schloss , Walter . Ivey Business School , Presentation by Walter Schloss to Value Investing Students . February 12 , 2008 .
Schloss , Walter . “ Why We Invest the Way We Do .” Lecture delivered at the Harvard Behavioral Economics Forum . May 16 , 1996 .
Walter J . Schloss Obituary . The New York Times . February 12 , 2012 .
Welling , Kathryn M . “ The Right Stuff : Why Walter Schloss Is Such a Great Investor .” Barron ’ s . February 25 , 1985 .
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