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July, 2000


Written 7/18/00

In contrast to an approach recommended by that father of value investing, Benjamin Graham, to buy a large number of bargain-priced assets and sell them as soon as they had achieved a fair price for their true value, generally within about two to three years, some highly successful contemporary value investors, among them such luminaries as Warren Buffett and Charles Munger of Berkshire Hathaway (BRK.A; BRK.B), suggest that an even more lucrative strategy for investing in equities is to focus only on the very best assets and to buy shares in them only when the odds of success are so completely stacked in your favor that you would be willing to have only a half-dozen or so of these golden eggs in your basket. Buffett, in particular, emphasizes that you need have only a handful of good ideas - or perhaps just one - in a lifetime, to achieve real wealth. He advises limiting your stock selections to perhaps just one a year, or even less, and then, when you have found a superlative idea, to add to your holdings in it and hold it for the very long-term, ideally forever.

With this in mind, what, in today's still relatively inflated market, might be worthy candidates for substantial investment and a very long holding period? I am looking for assets that combine safety with low price and high value, assets that, were I to have a million-dollar portfolio, would each deserve at least a $100,000 - 200,000 allocation.

Five candidates come to mind. Since, in previous issues of "larvalbug bytes" and its precursor, "BULL," each has had some attention, I shall not dwell here again on the reasons they all seem so attractive. The list is as follows:
- Berkshire Hathaway (BRK.A; BRK.B) (Class B: $1820)
- Tri-Continental Corp. (TY) ($25 3/4)
- Weitz Partners Value Fund (WPVLX) ($19.39)
- Deluxe Corp. (DLX) ($23 1/8)
- Genuine Parts Company (GPC) ($21 3/8)

Of these, the top candidate for addition to a core portfolio, our hypothetical one idea for the year, and in which we would intend eventually to hold at least $200,000, is Weitz Partners Value Fund. (Please see the discussion on this asset in our archived investment section for 2/00.)

There is no guarantee that the Weitz Partners will be so successful in the future, but their Value Fund five-year annualized return has been 29.6%*, at a time when value investing is not in style and when they have often been holding significant amounts of cash, awaiting better investment opportunities. The odds seem in their favor to do better than the major market averages in the years ahead.

(*The statistic is from the WPVLX annual report, 12/31/99. Additional comparative information from that report includes: The 5-year S&P 500 Index return was a somewhat lower 28.5%. Since inception [6/1/83], WPVLX and its prior partnership had an average annual total return of 18.2% vs. 17.6% for the S&P 500 Index.)


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.

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