Ronald Chan - The Value Investors: Lessons from the Worlds Top Fund Managers

About the Author

Ronald W. Chan is the founder of Chartwell Capital Limited, an investment management company based in Hong Kong. He is a frequent contributor to financial newspapers and magazines in the AsiaPacific region, and is the author of Behind the Berkshire Hathaway Curtain: Lessons from Warren Buffetts Top Business Leaders . Chan received bachelor of science degrees in finance and accounting from the Stern School of Business at New York University.

Acknowledgments

This book is a team effort. In fact, I see myself more as organizer and coordinator than author. Without my publisher, John Wiley & Sons, the book would never have come into existence, and without the collective participation of the many respected value investors, there would be no book to publish.

I would first like to thank Irving Kahn, Mark Mobius, Jean-Marie Eveillard, Thomas Kahn, William Browne, Teng Ngiek Lian, Anthony Nutt, Shuhei Abe, Cheah Cheng Hye, V-Nee Yeh, and Francisco Garca Params for their participation and valuable contributions. Interviewing them was an honor, and I can think of no better way of discovering the essence of value investing than learning directly from them and their collective experience.

Walter Schloss passed away on February 19, 2012, in Manhattan, New York. He was 95 years old. I remember the day I spoke to him in late September 2011, when he agreed to be featured in this book. On the phone, he told me about his travel plans, so a better time to meet would be in early 2012. He said, however, that if we could meet before his travels, it would work.

Without hesitation, I flew to New York from Hong Kong to meet Walter. Visiting his apartment in Manhattan and spending an entire morning with him, I learned about the meaning of success and the concepts of value investing. More important, I learned about honesty and integrity. At the end of our meeting, he mentioned how much he loves America because the country has given him the opportunity to do what he enjoys most: investing. Meeting the man was certainly an honor.

In addition to interviewing all of these investing legends, many individuals assisted me on my journey, for which I am most grateful. They include Matthew Kubo, Andrew Kahn, Beltrn Parages Revertera, Hedda Nadler, Robert Crawshaw, Javier Senz De Cenzano, Richard Piliero, Debbie Lusman, Alicia Wyllie, Biddy Hung, Anne Lui, Lisa Griffith, Judy Larson, and Zita Ng.

Bruce Greenwald, academic director of the Heilbrunn Center for Graham & Dodd Investing at Columbia University, was kind enough to write the foreword to the book. The New York Times has described him as a guru to Wall Streets gurus, so Professor Greenwalds contribution certainly adds weight to my work.

Besides Professor Greenwald, many prominent figures directly and indirectly encouraged my writing effort. They include Donald Keough, Warren Buffett, Donald Yacktman, David Darst, Nate Dalton, Charles Mak, and Prem Jain.

After publishing my first book, Behind the Berkshire Hathaway Curtain: Lessons from Warren Buffetts Top Business Leaders , I assumed my writing career was over and that I would be a one-book author. However, the positive feedback I received from my publisher and from readers around the world encouraged me to keep writing.

As the first book concerned Warren Buffett, one of the worlds best-known value investors, and the factors underpinning the success of his associates, it was only natural that my second book should focus on value investing. Interviewing renowned value investors from around the world was the obvious course of action, and The Value Investors: Lessons from the Worlds Top Fund Managers is the result.

Although coming up with the subject of my second book was not difficult, formulating a list of prominent value investors presented more of a challenge. The United States is home to many legendary value investors, but I wanted the book to be as culturally diverse as possible to reveal why individuals from different parts of the world share a similar investment mindset. Many people gave me general support and also helped me to brainstorm ideas, and sincere thanks are particularly due to Brian Lui, William Tsang, Kit Chan, Ambrose Tong, Michael Wong, Joyce Tsang, Tristan Wan, Dennis Lam, Tommy Jim, Bonnie Chan, Claire Chan, Sharon Chow, Darrin Woo, Jonathan Hui, Terence Hsu, and Dev Sujanani.

John Wiley & Sons gave its full support to this book, and I would like to thank Nick Wallwork, Jules Yap, Gemma Rosey Diaz, and Stefan Skeen for their help in the publication process. I would also like to thank Debra Englander, without whose guidance at the beginning of my writing career I would never have become a published author in the first place.

Although I am responsible for the flow and structure of the book, my personal editors, Erika Hebblethwaite, Mike Poole, and Nick Case, have helped me to perfect my use of the English language. The beauty of having both female and male editors is that they provide a good balance of feminine and masculine perspectives.

Last, but not least, I would like to thank my family for their support, including my wife, Jacinth, my daughter, Chelsea, my late father, Yat-San, my mother, Mylene, my sister, Jade, and my brother-in-law, Johnson.

When I began this project, my mother was worried about how I would find the time and luxury to write a book while dealing with a difficult economy, raising a family, and running an asset management company. My secret, I told her, is consistency. The book comprises 13 chapters, and each chapter contains roughly 5,000 words. I assured her that if I spent just one hour a day writing 500 wordsjust 500 wordsthen I could comfortably finish the book in five months with plenty of time left over to fulfill my other responsibilities.

I learned something similar from my interviewees. Superior investment performance, and respect from ones peers, does not come from a year or two of good returns. It is delivering sustainable investment returns consistently that counts!

As I wrote at the start, this book has not been an individual endeavor but is the result of a team effort. I could never have turned my dream into reality without the contribution of everyone mentioned here. Thank you all!

What does not destroy me, makes me stronger.

Friedrich Nietzsche

Walter J. Schloss founded Walter J. Schloss and Associates in 1955. A student of Benjamin Graham, the father of value investing, Schloss had been finding undervalued securities in America since the 1930s. Having served as a securities analyst at the Graham-Newman Partnership in 1946, Schloss started his own fund when Graham decided to retire in 1955. Schlosss son Edwin joined the fund in the late 1960s, prompting an official name change in 1973 to Walter & Edwin Schloss Associates .

Charging no management fees but taking a 25 percent share of the profits, Schloss started off with $100,000 capital. At one point, the fund grew to roughly $350 million. From 1956 to 2002, it generated a 16 percent compound return annually (roughly 21 percent before profit sharing) versus the 10 percent per annum generated by the Standard & Poors (S&P) 500 .

Although a difference of 6 percent may not sound like much, the magic of compounding means that over this 46-year period, a $10,000 investment in the S&P 500 would have generated close to $900,000, whereas a Schloss investor would have made close to $11 million on the same investment .

A chartered financial analyst since 1963, Schloss was also the treasurer of Freedom House, a Washington, DCbased international nongovernmental organization that conducts research and advocacy on democracy, political freedom, and human rights .