William Green: The Great Minds Of Investing – Profiles by Braun, Von Wyss & Muller

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Great Minds Of Investing - Georg von Wyss by Gisela Baur

Georg von Wyss owes his career as a value investor to chance. It was 1992, and he was working as a young analyst at Bank Vontobel, writing a report about Switzer-land and the European Union that was “probably not worth the money the bank paid me for it.” A colleague asked him to help out by attending a corporate presentation in-stead. So he borrowed his aunt’s car and drove to the event in a suburb of Lausanne.

The company in question was Nokia-Maillefer, a sub-sidiary of the Nokia Group. Skimming through its financial statements, he noticed that the current assets were worth more than the company’s entire market value. He realized instantly that this was one of those rare bargains he had read about in Benjamin Graham’s book The Intelligent Investor: “I thought, wow, this is the net-net situation Graham wrote about—probably one of the last in Switzerland.” There was something thrilling to von Wyss about the idea that you could buy valuable assets for next to nothing, if only you knew what you were doing. All of a sudden, the future seemed clear. “Value is my thing,” he decided. “That’s what I want to do from now on.”

Switzerland was not exactly a hotbed of value investing. But von Wyss had the advantage of an international upbringing. He had lived in Zurich until the age of seven and then moved to Michigan, where his father worked in banking. As a result, von Wyss spent much of his youth in the U.S. and went to Columbia University, earning an undergraduate degree in economics and a master’s in English and comparative literature. After that, he received an MBA from Dartmouth, then spent a couple of years as a financial journalist before realizing that “I would really much rather be an analyst.”

Thanks to this background, von Wyss is equally comfortable in both countries. So he quit his banking job in Switzerland and headed back to the U.S. to work for Michael Price, one of America’s most vaunted value investors. While von Wyss could easily have settled in the States, his wife agreed to stay there only “for a couple of years on the condition that we return right after.”

In 1995, they flew home to Zurich, where von Wyss landed a job at a Swiss bank, Rüd, Blass & Cie. It was there that he met Thomas Braun, his future business partner. Braun recalls: “I noticed Georg’s keenness to be an analyst right away…. He knew exactly what he wanted, and he confronted me immediately with his deep-value approach.”

Two years later, they founded Braun, von Wyss & Müller Value Investing with a business partner, Erich Müller. Since then, the firm has generated strong returns by importing the disciplined value approach that von Wyss had learned in America. Their Classic Global Equity Fund, which currently owns about 30 stocks from around the world, has averaged 10.4 percent a year since 1997, versus 3.2 percent a year for the MSCI World Index.

According to von Wyss, one reason for this success is the elaborate database system their investment team uses to coordinate the research process. He takes great pride in the database, which incorporates everything from standardized spreadsheets to checklists to corporate earnings estimates. “We are able to work in an extremely structured way,” he says, and “everyone has easy access to the work of the others.” The database also includes a watch list of potential investments, with prices constantly updated. “We never have to work blind. That’s incredibly reassuring-especially during a crash.”

Braun and von Wyss make the final decisions on which stocks make it into the portfolio. “It may sound a bit corny,” says von Wyss, “but we know that we can rely on each other.” They sit together in a big room, along with Müller and their five employees. The goal is to promote a healthy exchange of information. “It’s important that we not only profit from each other but can also benefit from constructive criticism.”

On the other hand, opinions from outsiders are not welcome. “We like to do everything ourselves,” says von Wyss. “While others may be singing a chorus of hosannas, we prefer to pray alone.” Nothing gives him greater pleasure than when his team buys an out-of-favor stock and is subsequently proven right because they were “smarter or more aggressive or simply did the research a bit better” than the competition.

Over the years, this small firm has earned an outsized reputation as one of Europe’s leading practitioners of value investing. But von Wyss, now 51, is not about to rest on his laurels. As he sees it, he and Braun are like cyclists in the Tour de France who are fighting their way up the mountain, not far from the front of the pack. “They know they are among the best in the world,” he says. “But somewhere up front, there are still a couple of other cyclists-and they’ve got to catch up with them.”

Great Minds Of Investing - Thomas Braun by Gisela Baur

For years, an investment analyst named Thomas Braun demanded that Swiss companies change their opaque accounting practices. He and a colleague had the gall to confront Switzerland’s close-knit business establishment at a time when most of the nation’s public companies didn’t release consolidated figures—an omission that left them huge leeway to manipulate their declared profits. The challenge by Braun and his colleague drew a furious response. “We were horribly criticized, even threatened,” he recalls. “We were told: ‘You guys are digging the grave of the entire Swiss economy.’”

Then, one day in the early 1990s, Braun and his colleague were summoned to Bern’s Bellevue Palace hotel, where the CFOs of Switzerland’s largest corporations were waiting for them. On that historic occasion, the companies finally agreed to introduce new accounting standards, renouncing their obscure practices. “I’ve rarely experienced such an incredible feeling in all my life,” says Braun, “particularly after all the years of hard work and having to stay strong against such opposition.”

Braun—now a partner and portfolio manager at Braun, von Wyss & Müller Value Investing (BWM)—has never gone with the flow. He’s not a member of any clubs. He’s not even comfortable hanging out with other value investors. For a contrarian stock picker like him, these antisocial ten-dencies are a virtue.

The son of a railway man, Braun was born in 1956 in Romanshorn, a town on Switzerland’s border with Germany. He was fascinated by history but chose the more practical path of studying economics at college, since he was “never going to inherit millions.” After graduating, he became an investment analyst at a Swiss savings bank. He then maneuvered himself into a three-month internship with various banks in New York, threatening to quit his job in Switzerland if he wasn’t allowed to go.

On his return to Switzerland, he plunged into the stock market, leveraging his meager assets by investing on mar-gin. Within two years, he earned a million francs—only to lose it all in the crash of 1987. “I had to sell my investments at a dreadful price just to pay off my loans,” he says. But he learned two important lessons: “I never again took out a loan. And because the blow was so psychologically brutal, I perceive everything now as relatively harmless and find it easy to remain calm. That’s a great asset.”

In 1986, Braun joined Société Générale, where he re-searched stocks for private clients. “We just selected the best bargains in the Swiss market and were very successful,” he recalls. Four years later, he moved to another bank, Rüd, Blass & Cie, to head the research department. In 1995, his boss there asked him to consider bringing a friend’s nephew into his team. “It smelled of favoritism, and I was not enthusiastic,” says Braun. But his concerns evaporated within minutes of meeting Georg von Wyss: “I recognized immediately that Georg would be able to show us some new things.”

The Great Minds Of Investing

The Great Minds of Investing by William Green

See full PDF below.