IM Club speaker
Luyi Guo (WG'09) Contributing Writer
Issue date: 4/14/08 Section: News
On Tuesday, Mr. Christopher H. Browne, a managing director of Tweedy, Browne Company and the Chairman of Tweedy, Brown Funds, sat down with more than 80 Wharton students to talk about value investing. This event, organized by the Investment Management Club's Speaker Series, was a real treat for the audience, because Mr. Browne and his firm are widely recognized as committed Graham-Dodd style value investors.
Mr. Browne opened the talk by regaling us of the history of Tweedy, Browne, which was founded in the 1920s. From the 1930s to the 1950s, the firm acted as a broker to the Father of Value Investing himself, Benjamin Graham and his investment firm Graham-Newman Corp. Later a string of legendary investors became clients of the brokerage business, including Warren Buffett and Walter Schloss. (Yes, Buffett purchased shares of Berkshire Hathaway through them.) After Tom Knapp joined from Graham-Newman in 1957, the firm transitioned to a value investment outfit.
Intrinsic value, or analyzing a company based upon some perceived underlying true value, is the approach Tweedy, Browne uses to value a company. "We don't try to predict what will happen" in the market. To Mr. Browne, investing is a "very logical business." "What's important is to stick to" basic investment principles and "not get pulled by fads." The firm's consistent strategy has lead to successful investments over the years not only in the US but also in Japan and Europe. Tweedy, Browne employs a diversified approach to their portfolio construction. No investment is more than 3% of the total portfolio, and the average holding period is about five years.
Mr. Browne is skeptical about the value added by the currently fashionable hedge funds and other alternative investments, and he is very critical of the risks taken on by a leveraged strategy. "Leverage is a major killer of investors' money... every so often things happen when they are not supposed to happen," he cautions. But turmoil also creates opportunities. For instance, Mr. Browne alluded to the fact that they have a lot of money in financial sector now, and it's important to figure out "who's not buying subprimes." Currently, he does not see a specific sector that is screaming value, but companies in Korea, Japan and the financial sectors could be interesting. A recent purchase of the firm was SK Telecom (SKM), a wireless telecommunication service provider in Korea.
Mr. Browne opened the talk by regaling us of the history of Tweedy, Browne, which was founded in the 1920s. From the 1930s to the 1950s, the firm acted as a broker to the Father of Value Investing himself, Benjamin Graham and his investment firm Graham-Newman Corp. Later a string of legendary investors became clients of the brokerage business, including Warren Buffett and Walter Schloss. (Yes, Buffett purchased shares of Berkshire Hathaway through them.) After Tom Knapp joined from Graham-Newman in 1957, the firm transitioned to a value investment outfit.
Intrinsic value, or analyzing a company based upon some perceived underlying true value, is the approach Tweedy, Browne uses to value a company. "We don't try to predict what will happen" in the market. To Mr. Browne, investing is a "very logical business." "What's important is to stick to" basic investment principles and "not get pulled by fads." The firm's consistent strategy has lead to successful investments over the years not only in the US but also in Japan and Europe. Tweedy, Browne employs a diversified approach to their portfolio construction. No investment is more than 3% of the total portfolio, and the average holding period is about five years.
Mr. Browne is skeptical about the value added by the currently fashionable hedge funds and other alternative investments, and he is very critical of the risks taken on by a leveraged strategy. "Leverage is a major killer of investors' money... every so often things happen when they are not supposed to happen," he cautions. But turmoil also creates opportunities. For instance, Mr. Browne alluded to the fact that they have a lot of money in financial sector now, and it's important to figure out "who's not buying subprimes." Currently, he does not see a specific sector that is screaming value, but companies in Korea, Japan and the financial sectors could be interesting. A recent purchase of the firm was SK Telecom (SKM), a wireless telecommunication service provider in Korea.
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