Walter Schloss was born in 1916.
At the age of 18 he started working life as a runner on Wall Street. And got the bug.
He was so interested in the markets that he registered for courses run by Benjamin Graham.
Eventually, he went on to work for Graham in his Graham-Newman Partnership.
Walter Schloss then served his country in World War II for four years.
Some 21 years later after getting that job as a Wall Street runner, he left Graham's company and started his own company - the WJS Partnership, with 19 partners and $100,000.
In the years 1956-1984 the money he managed for his clients averaged an annual compound growth rate of 21.1%. Way ahead of the S and P which included dividends.
In the year 2000 he closed his Fund and by 2003 he stopped managing other peoples' money.
Sadly, in 2012, he passed away.
Walter Schloss was a rare breed of man.
And modest too.
His method, that he taught to Warren Buffett, involved buying stocks cheap and selling them when they were over-valued. [Of course Warren Buffett modified this slightly by never selling].
He liked the Price to Book Value as a measure of valuing a stock.
So he decided to write his ideas down on paper which he called his '16 Factors Needed to Make Money in the Market'.
And here are all 16 factors:
1. Price is the most important factor when buying shares
2. Establish the value of the company
3. Book value is a good starting point for valuing the company
4. Don't ever buy on a tip
5. Be patient. Stocks take time to move
6. Don't be afraid to go on your own.
7. Make a decision and stick to it
8. Make your own philosophy
9. Don't rush to sell at a profit. The shares may go up more
10. When buying, look at the low for the last few years
11. Buy assets at a discount. Not earnings. Earnings can, and do, change
12. If you lose money, it's hard to make it back
13. Don't let your emotions, like fear and greed, rule your head
14. Compounding. Remember Einstein's Eighth Wonder and the Rule of 72
15. Stocks are preferred to Bonds
16. Be watchful of leverage. It can go against you as well as for you
They obviously worked for Walter Schloss. He experienced decades of continuous growth. A fantastic record.
Walter Schloss believed that the best way to invest was to focus on the assets of a company rather than its earnings. His Factor #11 above was accompanied by a quote:
"Earnings can change dramatically. Usually assets change slowly."
He went on to say that his concept of assets outweighing earnings was contrarian. He reckoned that most investors focused on earnings and are unwilling to buy shares in a company that is losing money.
Schloss argued that by buying discounted assets it provided a substantial margin of safety (he learned this from Benjamin Graham). His school of thought was that the value of the assets would eventually be recognised by the markets if:
Here are few additional pointers that Schloss liked to see in a company:
And here are a few personal traits that Schloss regarded as essential for both the investor and the money manager:
We couldn't find any book written by or about Walter Schloss. We could only uncover an audio version by him. But we will keep our eyes peeled for something.
Any investor who made such a marvelous record must have put something down on paper other than his 16 Factors. Over 21% compound growth is truly amazing. We'd all like to know more of how he did it.
The Art of Value Investing and Margin of Safety by Walter J. Schloss
Grab this rare piece of investment wisdom by one of Wall Street's most successful. Just click the link below:
Of all the Stock Trading Legends, we haven't come across anybody with a track record to beat Walter Schloss.
Makes us wonder, why is he so relatively unknown?
The majority of us do not possess the genius of Warren Buffett and his ability to pore over company accounts and spot a company that has an Economic Moat. But the assets of a company are there in the Financial Statements for all to see.
45 years of consistent 21% growth is awesome.
If you can get your Pension to perform anywhere near that, you'll retire a multi-milliionaire.