In 1993 Walter Schloss gave a great presentation called – Upper Level Seminar In Value Investing, at the Columbia Business School. Schloss’ notes for the presentation included a number of timeless investing lessons including the kinds of stocks he looks at for investment, how to scale into an investment, and how to manage a stock portfolio.
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The ExodusPoint Partners International Fund returned 0.36% for May, bringing its year-to-date return to 3.31% in a year that's been particularly challenging for most hedge funds, pushing many into the red. Macroeconomic factors continued to weigh on the market, resulting in significant intra-month volatility for May, although risk assets generally ended the month flat. Macro Read More
Here is an excerpt from the presentation:
What kind of stocks do we look at for investments?
We look for stocks that are depressed.
Why are they depressed?
Are they selling below book value?
Is good will in book value?
What has been the high low over the past 10 years?
Have they any cash flow?
Have they any net income?
How have they done over the past 10 years?
What is their debt level?
What kind of an industry are they in?
What are their profit margins?
How are their competitors doing?
Is the company doing poorly compared to its competitors?
We get their annual report, proxies, Valueline and quarterlies. What appears to be the risk on the downside vs. the upside potential? How much stock do the insiders own?
Based on the above factors and perhaps a few other items, if the figures look satisfactory, we will take an initial position. We will watch the action of the stock and decide how much more we may want. It will depend a good deal on price. Generally, we are happy with a 5% holding but we can go up to 10—12% if we really like it a lot.
Since we own some 60—75 stocks, we have small holdings in a number of securities. One reason for this is that while selling a stock, it goes down so that we end of holdings some of its shares. Sometimes when buying a stock it goes up and we don’t want to follow it up so we stop buying it.
On the whole we are allergic to bonds.
Today, what has happened? Everyone is now looking for franchises. The key, in my opinion, to successful investing is to relate value to price today. Instead of present value many investment managers are relating future value to present price. Since I can’t do that, I will let others do it and stick to what has worked for us.
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Article by Johnny Hopkins, The Acquirer's Multiple