Jean-Marie Eveillard And The World’s Best Investors by William Green, Barron’s Asia
What does it take to achieve enduring success as an investor? A dazzling intellect may help, but it’s useless without the right temperament. In my interviews with many renowned investors, I’ve found that they typically share several indispensable traits, including the independence of mind to go against the crowd, extreme patience and discipline, and extraordinary emotional fortitude.
These winning qualities appear in abundance in The Great Minds of Investing, a new book on which I collaborated with the photographer Michael O’Brien. The three profiles excerpted here tell the stories of Jean-Marie Eveillard, Francis Chou, and Bill Miller, who have each defied gravity by beating the market over decades. Still, success hasn’t come easy. Miller and Eveillard both suffered excruciating periods of underperformance that almost wrecked their careers. As hedge fund manager Mohnish Pabrai (also profiled in this book) told me, great investors must possess one invaluable characteristic: “the ability to take pain.”
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In the late 1990s, Jean-Marie Eveillard faced the investing equivalent of a near-death experience. Amid the insanity of the dotcom bubble, he refused to buy any of the overvalued tech, telecom, or media stocks that were enriching more carefree investors. His most prominent mutual funds, SoGen International and SoGen Overseas, lagged the market disastrously for three years running. “After one year, your shareholders are upset,” he says. “After two years, they’re furious. After three years, they’re gone.” By early 2000, 70 percent of SoGen International’s shareholders had dumped the fund and SoGen’s overall assets had fallen from more than $6 billion to barely $2 billion.
Value investing “works over time,” says Jean-Marie Eveillard, but he had always known that he would suffer from periods of underperformance. Still, he’d never experienced this sustained misery. “You do, in truth, start doubting yourself. Everybody seems to see the light. How come I don’t see it?” As his years in the wilderness dragged on, “there were days when I thought I was an idiot.”
Others agreed. Even his funds’ own board members turned against him, wondering why he had failed to embrace the new paradigm of instant, tech-fueled riches. One executive at his parent company, Société Générale, muttered that Eveillard was “half senile.” At the time, he was only 59. Eveillard thought he might be fired. Instead, the French bank sold his investment operation to Arnhold and S. Bleichroeder for about “5 percent of what it’s worth today.”
And then the bubble burst. The Nasdaq index plunged by 78 percent, devastating legions of reckless speculators. Eveillard’s perennially cautious, value-driven approach was vindicated, and Morningstar later gave him its inaugural Fund Manager Lifetime Achievement Award. His renamed firm, First Eagle Funds, rebounded so strongly that its assets have ballooned to almost $100 billion. Jean-Marie Eveillard retired as a fund manager in 2009, but he remains a senior adviser at First Eagle Investment Management. At 75, he retains his reputation as one of the enduring giants of international investing.
In retrospect, Jean-Marie Eveillard says his feat of trouncing the indexes over three decades was “due largely to what I did not own.” In 1988, when fad-chasing investors were besotted with Japan, he sold the last of his Japanese stocks, unable to find a single company cheap enough to meet his standards. As a result, he emerged unscathed when the world’s second-largest market imploded. Likewise, two decades later, he steered clear of financial stocks before the 2008 credit crisis.
This ability to avoid market mayhem grew directly out of his discovery of Benjamin Graham’s The Intelligent Investor in 1968, shortly after he left France to work for Société Générale in Manhattan. The greatest lesson was that “you have to be humble because the future is uncertain,” says Jean-Marie Eveillard. “Most people refuse to accept that.” For him, this meant buying cheap stocks that provided a significant margin of safety, then protecting himself further by diversifying broadly. Temperamentally, he wouldn’t dare to own a concentrated portfolio, because he was “too worried that it could just blow up” and was “too skeptical about my own skills.” Few professional investors so frequently utter the words “I don’t know.”
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