Value Investing / Main Index / previous / next

May, 2010


The investment focus this time is simply a plug for some free reports that might inspire you to enhance the way you invest. They may be received via regular mail, obtained in a PDF download form, or viewed on the internet through Tweedy Brown Company LLC.

Tweedy Brown has quite a vintage record in value investing. They began as a small brokerage and investment company in 1920. When the value investing pioneer, Benjamin Graham, began purchasing small quantities of neglected shares in the early 20th Century, he often found himself doing business through Tweedy Brown. He and their management at the time discovered they had interests in common, both seeking out or holding shares of little researched companies that had more value than their share prices, then holding them indefinitely till they might eventually be recognized by others for their true worth, usually leading to satisfactory price increases for the shareholders.

Such securities had little risk since in general enough holdings were kept in the portfolios that any significant downside surprise for one equity was more than offset by positive surprises for a number of others. Besides, the shares were usually acquired at such low prices that it could often be like getting a dollar's worth of value for fifty or sixty cents.

Graham maintained his relationship with Tweedy Brown, which, in turn, began to get more value investors' business as Graham and Dodd or later Graham and Rea or Graham and (Warren) Buffett, and other students of Graham's began to popularize value investing principles. Some of these produced investment records several decades long with returns averaging 20% or better a year. There is of course no guarantee of future returns, but in my opinion the odds favor those with a value bent over most mutual fund managers or the major market averages.

Yet, for some reason to this day value investors as a group are a misunderstood lot. Many would-be great investors simply do not get it. They hear things like getting a dollar's worth of value for less than a dollar in cost but dismiss it, maybe thinking somebody is trying to pull the wool over their eyes, not wanting to be taken in. Or they believe the host of business school professors who tell them why value investing does not work or is just a statistical anomaly, perhaps that they should follow the more popular efficient market theory instead.

Sometimes people are confused too by the large number of mutual funds that are named "value" funds but whose managers really just go about it in a rather lazy way, like dividing the S&P 500 stocks in half according to which have relatively high vs. relatively low price to earnings ratios and calling the low side value, the high side growth, and investing in most of the former. It is small wonder that the performance of these funds is ordinarily lower than the market averages after fees. If low P/E were the first criterion, fund managers should invest only in those having the smallest 10% of the price to earnings being considered, not the lowest half. Many of the remaining stocks would need to be excluded as not having a true margin of safety.

So, genuine value investing still, after all these decades, has a cloud hanging over it and is practiced by a minority of investors. This is just fine with them, however. It is not a case of "the more, the merrier." If you were looking to bid first on bargains at a car dealership, would you tell every neighbor about some of the great deals now available there? Probably not till after you had obtained the ones you wanted.

Nonetheless, over the years, to help promote its money management business and the small selection of its mutual funds, Tweedy Brown has performed a great service to those who are interested in how to invest the way Benjamin Graham and his followers taught. They have published and then made available for free a series of concise, well written reports that encapsulate just what value investing is all about. By now, they have compiled the results of research over 75 years and once again are offering, just for the asking, this summary to anyone paying attention.

I am particularly impressed, for instance, with their compilation "What Has Worked in Investing," a pamphlet that summarizes the findings of 50 research studies on value techniques. It is like a book of recipes for how to make delicious profits. Readers may also find of interest their report entitled "The High Dividend Yield Return Advantage."

In any case, whether you are an amateur investor seeking a little more knowledge on a topic that could prove profitable or a professional who just wants another handle on interesting money matters, there is much to like in Tweedy Brown's free reports.


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

Value Investing / Main Index / previous / next