The Business of Value Investing.pdf

38 The Business of Value Investing

of the Fidelity Magellan Fund. During his 13 years atop the

Magellan Fund, from 1977 to 1990, the fund ’ s value rose 28-

fold per share, making it the best - performing fund in the

world.

• Mason Hawkins. Hawkins founded Southeastern Asset Manag-
  e ment, which runs the Longleaf mutual funds, in 1975.
  Hawkins read Ben Graham ’ s Intelligent Investor while a high
  school senior, and his investment approach has followed
  Graham ’ s teachings ever since. Collectively the Longleaf funds
  manage over $ 20 billion and are one of the most shareholder -
  oriented investment funds in the world. All employees have
  their money invested in the Longleaf funds and nowhere else.


• Bruce Berkowitz. Berkowitz is portfolio manager of Fairholme
  Capital Management, which he founded in 1997. He is an avid
  disciple of Warren Buffett and the value - inspired approach.
  His investment philosophy, which has proven very successful,
  is to invest in businesses with talented managers (or jockeys,
  as he likes to call them) and in businesses that spin off a ton
  of cash. Since 1997, the Fairholme funds have handily outper-
  formed the markets, and Berkowitz is widely considered as
  one of the most talented money managers around today.

Learn from the Masters

Fortunately, we don ’ t all have to be like Buffett and be “ wired at

birth ” for investing. We do need to understand that successful value

investing hinges on activities that you are trained not to pursue and

often requires that you do the exact opposite of what the major-

ity is doing. As Buffett often says, “ You pay an expensive price for a

cheery consensus. ” Some of the best bargains usually are found in

industries that are currently under distress, where investment dol-

lars are exiting and not entering. If you want to invest in the cock-

tail party stock of the year, the idea won ’ t come cheap.

For example, we are taught that a highly diversifi ed portfolio is

the soundest approach. For the general individual, this might be an

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