michael price resource page

Michael Price

I owe a lot of credit for this resource page to Bruce Greenwald’s book Value Investing: From Graham to Buffett and Beyond. Bruce Greenwald devotes an entire chapter to Michael Price in the book. In addition, I utilized other publications and websites to help me write up this resource page.

Bio of Michael Price

Michael Price was born on 05/17/1953. He graduated from the University of Oklahoma with a Bachelors in Business Administration in 1973. Price started working directly out of college for legendary investor Max Heine of Mutual Series mutual fund. Max Heine tragically died in a car accident in 1988 and Michael Price took control of the fund. During that time period the fund returned about 20% per year. Max Heine was an expert in special situations like bankruptcies and companies that were re-organizing. Two thirds of the fund consisted of value stocks, and one third of the fund was devoted to special situations. This allowed the fund to to do well in bull or bear markets since the special situation stocks were highly uncorrelated to other stocks.
Price sold the fund to Franklin Resources in 1996 for $670 million. One of his reasons for selling was that he felt he had too much money under management to invest successfully. However, he agreed to stay on until 1998, after which time he only served as chairman of the fund.

Price is married and has 4 children, and with an estimated current net worth of around $1.4 billion he is one of the richest people in the world. He has donated tens of millions of dollars to his alma matter- University of Oklahoma.

Investment Philosophy of Michael Price

When Price started his own fund in 2001 he utilized many of the value techniques that Max Heine had tough him. During the dot com bubble he refused to get caught up in the dot-com bubble.

Michael Price calculates intrinsic value based on the following question: How much would a buyer pay for the entire company? He studied mergers and acquisitions to get a sense of how much a company would pay. i.e. if a media company was recently acquired at 10x EBITDA, and Price found a similar media company trading at 5x EBIDTA the company was likely undervalued. However, Price also realizes that no to companies are alike and therefore adjustments might need to be made to reach an intrinsic value estimation. Price looked at traditional metrics like price over book value, price over cash flow etc. but his main question was how much the company would be bought by another party. Price also takes notice to management and whether they are acting in the interests of shareholders.

Price also likes to look at companies in trouble. He checks the news for companies that are in trouble and will consider buying them if they are 30-40% below his estimate of intrinsic value. He looks for bankrupt companies that have assets selling for less than the company’s intrinsic value. At first he looks for senior securities, once the reorganization plan starts to take place Price considers buying the common stock also.

When it comes to bankruptcy investing major holders have a large advantage since two-thirds of investors must approve any re-organization plan. Price tries to gain a large foothold in the company at this point and secure an agreement which will be profitable.

On a related note Michael Price likes to sometimes take an activist role even in non bankruptcy situations. He will sometimes buy enough stock to get seats on the board of directors. He can then force the company to act what he feels is in the best interests of the shareholders(including himself).

The main lessons one can learn from Michael Price are as follows:

Stick to your investment philosophy regardless of macro conditions, or what other investors are doing.

Be Patient! Wait till a stock reaches a price that leaves a high enough margin of safety.

Stay within your area of competence.

When businesses have several segments evaluate each segment separately to come up with an intrinsic value for the whole company.

Michael Price’s Current Portfolio

Current Portfolio

Recent Buying and Selling

Books About Michael Price

Value Investing: From Graham to Buffett and Beyond By Bruce Greenwald

The 5 Keys to Value Investing By J. Dennis Jean-Jacques. J. Dennis Jean-Jacques is a former senior analyst with Mutual Series Funds, he discusses the analytical framework he observed during his tenure as an analyst.

Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor By Seth Klarman. Klarman who worked for Michael Price discusses Price in the beginning of the book, and the large impact Michael Price had on a young Seth Klarman.