Ron Muhlenkamp 2013 Letter: Ben Graham ‘Why The Markets Went Down’

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Ron Muhlenkamp 2013 Letter to investors (see Q4 letter here)

January 6, 2014

Dear Clients and Shareholders:

We started our firm, Muhlenkamp & Company, Inc. in 1977 and created the Muhlenkamp Fund in 1988, so in 2013, the Company turned 36 years old and, on November 1, the Fund turned 25. We are grateful to all of you for making it happen. Few money managers last that long, and fewer still are able to maintain their independence and focus. Thanks to you, we have done both.

To mark the occasion, I want to discuss what we do and our plans for the future. This will be a review for those of you that have been with us since the beginning, but we think a review might be useful with all that is taking place in the markets and in the economy. And some of you may be reading this for the first time, so we hope it’s a useful introduction.

We are a family-owned and operated business, completely independent and unaffiliated with any other company. We employ 16 people with a variety of backgrounds and experiences; you can learn more about us and what we’ve done at

Our motto is “intelligent investment management” to emphasize that we remove the emotion from investing. We might also be described as “common sense” or “no BS” investment managers—you get the idea. Investing other peoples’ money is a rational profession and we apply ourselves to it on a full-time and continuous basis.

We invest money for people who want their money to work as hard for them as they had to work for it, and who are looking for an opportunity to grow their money over periods of time, best measured in years and generations. Our clients and shareholders hire us to protect what they have, make it grow, and ease their minds.

We are expert in financial markets and invest primarily in stocks and bonds. Our discipline  is to buy good companies on sale and utilizes the fundamental security analysis pioneered by Ben Graham. My essay, Why the Market Went Down, builds on Ben Graham’s work and describes how we value companies and determine the price to pay for them. You can find the essay in my book, or on our website.

Our work is important because money has two purposes. It is used for buying products that provide for our daily wants and needs; food, clothing, shelter, etc. But money is also used for building capital—machinery, plants, stores, and infrastructure—which has made the products we buy better and cheaper from one generation to the next. This progression applies to families, to nations, and to the world. Helping our clients and shareholders increase their capital enables them to feed their families, educate their children, and help others do the same.

It is vital to communicate with the people that hire us, so we publish a free quarterly newsletter and online market commentaries. We also conduct periodic seminars and conference calls to share what we are seeing and what we think is important. We believe an informed investor is a more successful investor, and we welcome the chance to talk with you and answer any questions you have.

We post much of what we say, do, or write on our website and encourage you to browse the site and give us your feedback—especially where you think we are missing something. Please enroll in electronic delivery of our publications so you can receive information in a more frequent and timely manner; not everything we do gets published on paper.

Periodically, we are asked “What is your plan for when Ron wants to retire?” which is pertinent to our plans for the future. I hold several offices for the Company and the Fund and each of those roles allows a different time frame for delegating those responsibilities.

On November 1, 2013, I assigned Tony Muhlenkamp the responsibilities of President of the Company. (I remain President of the Board of Trustees for the Fund.) While I continue to work full time as Portfolio Manager for our clients and Fund shareholders, I have named Jeff Muhlenkamp as Co–Manager to assist me. With Jeff serving as Co-Manager, there is a clear succession for when I am ready to retire. Brief biographies for Tony and Jeff follow, so that you may review their backgrounds.

The rest of our Investment Analysts remain firmly in place, and all of our employees have expressed their support of the changes in roles and responsibilities. They are glad to know there is a vision to grow the business beyond my lifetime. We hope you are equally pleased.

While some responsibilities have changed, most everything else remains the same. We appreciate your continued confidence and the opportunity to work with you. Please let us know if you have any questions, or if you are working on something we can help with. We look forward to hearing from you.

Best regards,

Ron Muhlenkamp

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