“The second case is Tom Knapp, who also worked at Graham-Newman with me. Tom Knapp was a chemistry major at Princeton before the war; when he came back from the war, he was a beach bum. And then one day he read that Dave Dodd was giving a night course in investments at Columbia. Tom Knapp took it on a noncredit basis, and he got so interested in the subject from taking that course that he came up and enrolled at Columbia Business School, where he got the MBA degree. He took Dodd’s course again, and took Ben Graham’s course. Incidentally, 35 years later I called Tom to ascertain some of the facts involved here and I found him on the beach again. The only difference is that now he owns the beach!” — Warren Buffett, The Superinvestors of Graham-and-Doddsville

Tom Knapp and Ed Anderson: Background & Bio

Tom Knapp was one of Warren Buffett’s ‘Superinvestors of Graham-and-Doddsville’. Tom Knapp earned his MBA degree from the Columbia Business School after World War Two and went to work at Benjamin Graham’s partnership. Then in 1968, Tom Knapp and Ed Anderson, another Graham disciple formed Tweedy, Browne Partners.

“In 1968, Tom Knapp and Ed Anderson, also a Graham disciple, along with one or two other fellows of similar persuasion, formed Tweedy, Browne Partners, and their investment results appear in Table 2. Tweedy, Browne built that record with very wide diversification. They occasionally bought control of businesses, but the record of the passive investments is equal to the record of the control investments.”– Warren Buffett, The Superinvestors of Graham-and-Doddsville

tweedy, browne returns Tom Knapp and Ed Anderson

Tweedy, Browne still exists today, although unfortunately, Ed Anderson passed away on February 9, 2012 at the age of 83. The group’s claim to fame is the fact that no Managing Director has ever left Tweedy to join another investment firm. In its 90 year history, Tweedy, Browne has only employed eleven Managing Directors, four of whom are currently active.

As of September 30, 2014, the firm managed approximately $21.4 billion and has four main value focused funds.

With $8.7 billion of assets under management, the Global Value Fund is the largest of Tweedy, Browne’s funds and the fund uses a “Ben Graham” value-oriented approach investing.

Tweedy, Browne

From http://www.tweedy.com/

A Brief History

Tweedy, Browne Company LLC, a successor to Tweedy & Co., was first established by Forrest Birchard Tweedy in 1920 as a dealer in closely held and inactively traded securities. The Firm’s 94-year history is grounded in undervalued securities, first as a market maker, then as an investor and investment advisor. The Firm’s investment approach derives from the work of the late Benjamin Graham, co-author of the first textbook on investment research, Security Analysis (1934) and author of The Intelligent Investor (1949). Graham, through his investment firm Graham-Newman Corp., was one of the Firm’s primary brokerage clients in the 1930s, 1940s, and 1950s. It was through Graham that the original partners of the Firm developed brokerage relationships with investment legends Walter Schloss and Warren Buffett, and met Tom Knapp, who joined the Firm in 1957 from Graham-Newman and led its conversion from broker to investor.

In 1959, the partners of then Tweedy, Browne & Knapp pooled their capital in a partnership investment vehicle. In 1968, the firm accepted its first outside money management clients as limited partners of this vehicle. In 1975, Tweedy, Browne registered as an investment advisor and began managing separate accounts for individuals and institutions. As of September 30, 2014, the firm managed approximately $21.4 billion for individuals, institutions, partnerships, off-shore funds and four mutual funds of a registered investment company, the Tweedy, Browne Global Value Fund, the Tweedy, Browne Global Value Fund II — Currency Unhedged, the Tweedy, Browne Value Fund, and the Tweedy, Browne Worldwide High Dividend Yield Value Fund. A more complete account of the firm’s colorful history is contained in the March 31, 1995 Annual Report to shareholders beginning on page 7. We think you will enjoy reading it.

In 2006, Tweedy, Browne began to broadly offer its clients a value strategy that seeks long-term growth of capital by investing in companies around the globe that the adviser believes to have above-average dividend yields, an established history of paying dividends and reasonable valuations. The firm has managed some accounts in this strategy since 1979 and began to offer it more broadly beginning in 2006. In September 2007, the firm launched the Tweedy, Browne Worldwide High Dividend Yield Value Fund, which can accommodate investors of all sizes. Learn more about this fund here.

Traditional Investment Philosophy

The investment management principles practiced by Tweedy, Browne derive from the work of the late Benjamin Graham, professor of investments at Columbia Business School and author of Security Analysis and The Intelligent Investor. Tweedy, Browne’s research seeks to appraise the worth of a company, what Graham called “intrinsic value,” by determining its acquisition value, or by estimating the collateral value of its assets and/or cash flow. The term “intrinsic value” may also be referred to as private market value, breakup value or liquidation value. The process is more closely related to credit analysis, for as we have said, we are as concerned with the return of our capital as we are with the return on our capital. Investments are made at a significant discount to intrinsic value, which Graham called an investor’s “margin of safety.” Investments are generally sold as the market price approaches intrinsic value, with the proceeds reinvested in other situations offering a greater discount to intrinsic value. Adhering to the principles of intrinsic value and margin of safety results in an investment policy that runs counter to the general market psychology, and seeks to reduce the decision to purchase or sell securities to a discipline rather than an art.

In determining intrinsic value, our research focuses on fundamental principles of balance sheet and income statement analysis, and a knowledge and understanding of actual corporate mergers, acquisitions, and liquidations. From more than 20,000 publicly traded corporations worldwide, we research and select for investment, those issues selling at substantial discounts to our estimate of intrinsic value. To minimize errors in analysis or events which could adversely affect intrinsic values, we adhere to a policy of broad diversification within individual portfolios, with no one issue generally accounting for more than 3% to 4% at cost of portfolio assets, and no one industry group generally accounting for more than 15% to 20% of portfolio value. Portfolios are not constrained by market capitalization considerations with the result that a significant portion of portfolio assets may be invested in smaller (generally under $1 billion) and medium (up to $5 billion) capitalization companies.

Most investments in Tweedy, Browne portfolios have one or more of the following investment characteristics: low stock price in relation to book value, low price-to-earnings ratio, low price-to-cash-flow ratio, above-average dividend yield, low price-to-sales ratio as compared to other companies in the same industry, low corporate leverage, low share price, purchases of a company’s own stock by the company’s officers and directors, company share repurchases, a stock price that has declined significantly from its previous high price and/or small market capitalization. Academic research and studies have indicated a historical statistical correlation between each of these investment characteristics and above-average investment rates of return over long measurement periods.

Tweedy, Browne has compiled a complimentary booklet entitled What Has Worked In Investing. We encourage all current and prospective shareholders to read it. It describes over 50 academic studies of certain investment criteria that have produced high rates of return. In the studies included in What Has Worked In Investing, attractive returns were found for stocks with one or more of the following investment characteristics: low stock price in relation to book value; net current assets; earnings; cash flow; dividends or previous share price; small market capitalization and a significant pattern of stock purchases by one or more insiders (officers and directors), or by the company itself. (Please note that the performance reflected in the studies does not represent the investment performance of the Tweedy, Browne Funds.) The studies examined in the booklet focus on mature markets from around the world. The investment characteristics explained in this booklet, which are “value” oriented characteristics, have been the core of Tweedy, Browne’s investment philosophy and stock selection decision making process for more than 50 years, and are the basis for the management of the Global Value Fund, Global Value Fund II — Currency Unhedged, Value Fund, and Worldwide High Dividend Yield Value Fund.

Tom Knapp and Ed Anderson: Tweedy, Browne Papers and Speeches

  • The High Dividend Yield Return Advantage: An Examination of Empirical Data Associating Investment in High Dividend Yield Securities with Attractive Returns Over Long Measurement Periods
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  • What Has Worked In Investing, Studies of Investment Approaches and Characteristics Associated With Exceptional Returns
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  • 10 Ways To Beat An Index
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Tom Knapp and Ed Anderson: Tweedy, Browne Articles and Interviews

Tom Knapp and Ed Anderson: Tweedy, Browne Annual and Semi-Annual Reports

A full list of Tweedy, Browne annual and semi-annual reports, dating back to 1993 can be found here.

Tom Knapp and Ed Anderson: Tweedy, Browne Quarterly Commentary

2014

2013

A full list of Tweedy, Browne quarterly commentary notes, dating back to 2003, can be found here.