In January 2007, Walter Schloss sent Warren Buffett a list of stocks that he and the Walter & Edwin Schloss Associates partnership owned at one time or another. Here is the list Schloss sent:
At a Grant Interest Rate Observer Conference, Schloss was asked the turnover in his portfolio. His answer:
“I guess 20 or 25 percent per year. About every four years we turn over. We want to get long-term capital gains and when you buy a depressed company it’s not going to go up right after you buy it, believe me. It’ll go down. And therefore you have to wait a while for that thing to go around and it seems about, four years seems to be the amount of time it takes. Some take longer.”
Given that Schloss was running around 100 positions at any one time, that would mean, assuming a four year turnover, he would come up with 25 new positions. In the document he lists the stocks he owned in the 1990s. The partnership would have accumulated approximately 250 new positions in that time (all else being equal).
It is interesting to really look at these stocks. I am going to focus on those ones owned post 1990 as those are the ones that seem the most relevant. I am going to jot down some bullet points – If you see anything I am missing, please leave a comment.
- Despite previous comments that he abhors debt, this list shows names like Downey Financial, Freddie Mac, and a few other financials. So financials were not a “full stop.” That being said, they are very rare on the list meaning they must have been pretty special situations for Schloss.
- Industries really spam the gamut – Lots of basics, industrials, insurance, consumer products. Really everything.
- Some of these companies are very high quality – Seems to me Schloss purchased them when they weren’t perceived as such: Schering Plough, Bristol Myers, Diageo, IBM, Disney, Barrick Gold, McDonald’s, Sherwin Williams, JM Smucker, Autozone, Kellogg
- Some of these companies have filed (Reader’s, Bombay), but more have been taken out by another purchaser
- He notates the document with “Old Holding.” – It would seem these are positions he owned post 1990 which he once owned before 1990. Cigar butt has come back alive for a second puff?
- While I consider myself pretty well versed in market history, I have no idea what some of these companies are. I once read a quote that the best cigar butt investment is a company you have never heard of. I need to find that quote.
Hello,
Very interesting.
All I have been told about Walter Schloss is that he invests only in net nets. But from that list, it seems net nets are not the only companies he is looking for.
I’m not an expert about Wells Fargo or Mc Donald’s but I don’t think these companies have ever traded at a discount to their net current assets (and for Wells Fargo net current assets is just insignificant in fact).
Maybe he uses other Graham techniques, like the 10 year PE, or things like that.
Did he ever made comments about his investment technique(s) ?
Great write-up, thank you!
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[...] Value Forum ← Walter Schloss’ List of Stocks [...]
Value Investing: From Graham to Buffett and Beyond’s Profile of Walter and Edwin Schloss Part 2 // Oct 5, 2010 at 10:24 pm
[...] tend to avoid technology. What I find interesting about this quote is if you look at the stock holdings of the Schlosses over the years there are a smattering of these sorts of companies (including bio tech). [...]