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Field of Play


somebody else can come along and change it again. If, because of the threat of technological obsolescence, I’m uncertain about a company’s cash flows several years out, I’ll put a big discount on those cash flows and conclude they’re not worth much. Because Wall Street tends to put a large value on the future cash flows of technology companies, we rarely find one that we consider very attractive. Ed Wachenheim, 2.29.08

Real estate is a natural for a value-investing firm like Third Avenue. Real estate companies typically have identifiable hard assets that are relatively easy to value based on a sum-of-the-parts analysis to arrive at a net asset value you can compare with the current stock price. Michael Winer, 8.31.07

We’ve never been that fond of the hotel business because the tenants move out every night. That makes the business susceptible to economic swings in a way that office buildings with long-term leases to credit-worthy tenants aren’t. We prefer to see more predictable streams of cash flow than lodging companies typically have. Michael Winer, 8.31.07

Gold kind of scares me because very often the people involved with it seem to be slightly insane. My other problem is I don't know how to value it. That said, I can certainly see why gold could be considered somewhat of an insurance policy, if not an investment in its own right. Any kind of systemic economic turmoil is likely to drive gold prices higher. James Montier, 10.31.08

We don’t look at gold as a commodity, but as a form of insurance against what Peter Bernstein calls extreme outcomes. In most circumstances in which worldwide equity markets would go down – and not just for a week or two – the price Winter 2008

of gold would go up, providing a partial offset to the hits we’d take in our equity portfolio. Jean-Marie Eveillard, 5.30.08

I find it almost sickening what has been done to the country’s balance sheet, which is only going to get worse as the government tries to spend its way out of our many and varied problems. In that kind of environment, we believe gold as a storehouse of value will come to even greater prominence. William Nasgovitz, 9.30.08

us to believe they can more than deal with some ups and downs. John Rogers, 11.30.05

My law of money management profitability says that because of fee structures, the rate of return a money manager gets on its capital is, by definition, better than the rate of return the client gets on his capital. If you find stocks that are desirable, you’d be better off buying the money manager holding those same stocks than buying the stocks themselves. Murray Stahl, 11.21.07 GOING ABROAD

There's a saying that you should not confuse a clear vision with a short distance. We're willing to own gold even though it may not act as a hedge in the near future, because we have a fairly clear vision about what will happen to inflation three, four or five years out, and it's not a pretty sight. Charles de Vaulx, 11.26.08

I have always had an affinity for companies that actually make things. We favor companies with transparent businesses that we can understand fairly quickly and those that have large and recurring maintenance, repair and overhaul revenues from an installed base, such as elevator companies or aerospace-parts firms. Alexander Roepers, 2.28.07

We don’t like businesses that are completely reliant on human capital that can walk out the door. We have no rule against it, but you generally won’t find us investing in things like investment banks or consulting firms. Donnell Noone, 4.30.08

We’ve invested for a long time in the mutual-fund industry, for example, and clearly see it as within our circle of competence. Our experience with the longterm track records of companies like T. Rowe Price or Franklin Resources leads

From day one we've had a significant portion of our assets invested outside the United States – it's currently about 30% of our gross exposure. This is probably too broad a generalization, but in our view non-U.S. markets tend to be less efficient than the U.S. market. In an ideal world, I'd like to be more selective in the U.S. and take advantage of more opportunities outside the U.S. Lee Ainslie, 12.22.06

With the tremendous run in international stocks over the past three years, the valuation gap has clearly closed. But, in general, you still see less long-term commitment to owning equities by investors outside the U.S. When markets run into trouble, you’ll see more wholesale selling of equities by non-U.S. institutional holders. There may be some historical precedent to that, and we hope it continues. Will Browne, 9.29.06

Over the next ten years it’s far more likely that the huge amount of capital owned by the rest of the world will grow by investing somewhere other than the U.S., whether it’s in infrastructure in China or the Middle East, or to develop consumer markets in places like India. John Burbank, 8.31.08

Value Investor Insight 8

Words of Investing Wisdom  

Greatest Hits” collection of investing insight from Value Investor Insight

Words of Investing Wisdom  

Greatest Hits” collection of investing insight from Value Investor Insight