chrisleithner.ca

Leithner Letter No. 11
26 November 2000

The Next Warren Buffett

As detailed in the past month in The Wall Street Journal, Mr Buffett’s succession plans are a matter of growing public comment. TWSJ has speculated that Mr Lou Simpson, currently charged with the investments of Berkshire’s GEICO insurance subsidiary, may eventually manage its parent company’s billions of securities. Indeed, Mr Buffett wrote in Berkshire’s 1995 annual report that “Lou takes the same conservative, concentrated approach to investments that we do. ... His presence on the scene assures us that Berkshire would have an extraordinary professional immediately available to handle its investments if something were to happen to [Vice Chairman Charles Munger] and me.” With a glowing testimonial from such an eminent investor, Mr Simpson’s approach to the allocation and stewardship of capital is clearly of much more than passing interest. Hence a recent article worth reading is The Next Warren Buffett by James M. Clash (Forbes 11 October 2000).

Graham’s Successors

Tweedy Brown Company LLC, established in 1920 and based in New York, has an enviable reputation among value investors. Its investment approach derives from Benjamin Graham (who, through his investment firm Graham-Newman Corp., was one of Tweedy’s primary brokerage clients in the 1930’s, 1940’s and 1950’s). It was through Graham that the original partners of Tweedy developed brokerage relationships with outstanding investors such as Walter Schloss and Warren Buffett; and it was from Graham-Newman Corp. that Tom Knapp joined Tweedy Brown in 1957, leading TB’s conversion from broker to investor. Given the firm’s pedigree, the views of its principals are well worth studying.

The Changing Face of Value Investing

What does it mean to be a contemporary value investor? Have value strategies evolved? Should a value investor own technology stocks? Much babble has been spoken and nonsense written about these topics. Several cuts above the run of the mill is The Changing Face of Value Investing by Susan Dziubinski. In it Morningstar CEO Don Phillips, Legg Mason’s Bill Miller, Oakmark’s Bill Nygren, and Davis Funds’ Chris Davis discuss these questions. Chris Leithner’s $0.02 worth: Bill Miller is particularly sharp and his words and thoughts well worth studying.

Two New Books for the Christmas Stocking

Robert G. Hagstrom, author of two well-received books about Warren Buffett’s investment methods, has written a new book entitled Latticework: The New Investing. The book adopts a broad (“liberal arts”) approach to the operation of markets and the understanding of investing. I don’t yet have a copy, but according to a recent (20 October 2000) review in bizjournals.com, “this work was inspired, in part, by Charlie Munger, Vice Chair of Berkshire Hathaway. Mr. Munger believes that extraordinary investing and exceptional insight can only be achieved when people adopt multiple viewpoints that intersect in the form of a latticework. The book draws examples from biology, mathematics, physics, economics and psychology.”

Mr Munger is also the subject of a recently-published (13 October 2000) biography by Janet Lowe. The book, entitled Damn Right: Behind the Scenes With Berkshire Hathaway Billionaire Charlie Munger has a forward by Warren E. Buffett. I haven’t read it either, but a blurb states “Warren Buffett may be the household name, but Berkshire Hathaway Director and Vice Chairman Charles Munger is considered by many to be ‘the brains behind Warren Buffett.’ One of the investment world’s most private figures, Munger is the man Buffett credits with teaching him the value of great franchises and the virtues of qualitative analysis. In his own quiet way, he has helped expand Berkshire’s value (and his own personal fortune) to mammoth proportions. In fact, Berkshire Hathaway’s stature as a model investment firm owes much to Munger’s staunch advocacy of ethical business practices, his brutal honesty, and his fame for ‘cutting through the bull.’ Now, for the first time, Damn Right! Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger lets the public discover the tactics and techniques, the business philosophy and humor of this highly influential, yet little known, financial wizard.” 

Best Wishes to Joy

The readability and navigability (yes, it’s a proper word – I checked) of Leithner & Co.’s website owes nothing to me and everything to Joy Rhonda Williams of Artist Web Design – which I can recommend unreservedly for any and all web design services. Her impending emigration is a loss to Queensland and a gain to California’s Silicon Valley. We are extremely fortunate, however, that Joy will continue to manage Leithner & Co.’s presence on the Internet from her new base Stateside. Many thanks, Joy, for your great and future service – and all best wishes for the bigger and better things which await you.

Chris Leithner


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