Category: Investment Planning

A Farewell to Marty Whitman

Most of us vividly remember particular incidents in our lives. So it is with my chance meeting with Martin Whitman, founder and driving force behind the Third Avenue Value fund company. He passed away last week at age 93, and to quote his remembrance in last week’s Wall Street Journal, “He was an extraordinary investor, impassioned philanthropist, impactful teacher, and a true capital markets pioneer.” He was all of those things and more. In January of 1999 I took a week off from my day job to attend Benjamin’s Graham’s Columbia Business School course on value investing, resurrected after fifty years and taught by Bruce Greenwald. As you might expect, New York City in January is cold and dreary, and I found myself totally unprepared for the coursework coming at me. On the second day of the course, it was announced that we would have a mystery guest speaker to close the day with a reception afterwards. That speaker was Marty Whitman.

Keep in mind that January 1999 was close to the top of the internet bubble, which made his talk on deep value investing in both the stock and distressed debt markets even more interesting. Obviously, value investing was totally out of favor and Marty, along with other well-known value guys, like Jean Marie Eveillard of First Eagle and Robert Sanborn of Oakmark, was having a hard time and losing clients in that environment. During the reception in his honor, I introduced myself and was surprised how he drew me into a memorable conversation. He asked where I was from, and when I told him North Alabama, he asked where again. When I responded Gadsden, he laughed said he had been stationed at Camp Sibert just on the outskirts of Gadsden during WWII. I quickly understood that he had more knowledge of my hometown during that period than I did, and he enjoyed remembering stories from that time and place. He was very personable and also wanted to know about my family and career. When he found out that I was considering a career change, it became an even more important conversation. He urged me to consider an investing career and to follow a different path. I am forever grateful!

So, you might ask, “What is the relevance of this story”? First, Mr. Whitman was an extraordinary investor and seemed to be passionate about his craft and life in general. His style was global and always deep value. It led to him to outperform the stock market more often than not. Second, he was interested in people, who they were, and what they were doing. He didn’t have to talk to me, but his advice helped. And third, I very quickly learned that although over the years, he had been winning with deep value, that no style, even his, worked all the time. Flexibility and understanding of the rotations of the markets is very important, important enough to understand when and if his style or another style fits into a portfolio. In a 2015 interview he talked about how after the financial crisis, his funds struggled because the Fed’s quantitative easing and the lack of volatility. With the recent volatility, this investment climate appears to be returning to being a “stock pickers market.” Marty, along with many of his deep value peers, is undoubtedly smiling.

Thoughts on the Market

Note: This market review was published on January 23rd, 2018 and may not be reflective of current market or investing issues.

Rule No. 1 – Never Lose Money. Rule No. 2 – Never Forget Rule #1.

~Warren Buffet

Rarely do I listen to the talking heads on the business channels.  But when I do, or even when I listen to forecasts from money managers we know and trust, I am transported back to the late nineties. Back then all you heard was that “technology and the internet has created a new investing paradigm.”  How could you not have all your money in stocks, stocks that had no earnings, but were grossly overvalued?  There were a handful of excellent value managers during that time who refused to participate in the market frenzy, including the one quoted above.  Many lost over 70% of their assets, or were fired, or both!  Today, as markets head ever higher the phrase is that “there are strong earnings.  Global markets are synchronized and the investing environment is good everywhere.”  I just can’t figure out whether I’m in early 1997 or late 1999.

We do a lot of research at Longview.  Mostly we concentrate on global economies, the global investing environment, asset allocation, what to buy, why to buy, what not to buy and on and on and on!  Most economists we respect and follow think we are in the late stages of the economic cycle, meaning that we are much closer to the end of favorable markets than the beginning.  But that is where their consensus ends.  Some economists think this good investing environment could continue for several more years.  Others see storm clouds on the horizon.

Our main investment objectives are two-fold: 1) not to permanently impair your capital and 2) help our clients accomplish their financial goals.  We have done this over the years by growing assets when there is an appropriate environment and protecting assets when there is not.  We are data dependent, hence all the research mentioned earlier.  Eventually, we know we will have to transition from growth to protection.  We are not there yet, maybe not even close.  But we do think the global economy may transition into one that is much slower, similar to markets not seen for over fifty years.  Please understand that “may transition” means that there are multiple future scenarios, and none knows exactly which scenario will appear.  But we do think that there is a probability that the investment tools we now use could be exchanged for ones from a much different time, leading us to morph from grow to protect.

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