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The Profoundly Simple Wisdom of Walter Schloss on Producing Towering Returns

What You'll Learn

  1. Walter Schloss' performance record vs Buffet

  2. Walter Schloss on his investment philosophy

  3. Walter Schloss on buying stocks

  4. Walter Schloss on selling stocks

I've shown you how small investors can beat the professionals on Wall Street by not playing with the same rules.

Walter Schloss was such a man.

OK… well he was a professional, but not in the normal sense.

He didn't play by Wall Street rules. He took the unorthodox route of ignoring news, ignoring tips, sticking to cigar butts and holding thousands of stocks over his lifetime.

The result?

Here's a table view. Unfortunately, data is only available up to Q1 of 1984.

Over this period of 28 and a quarter years, the Schloss partnership returned a staggering 21% CAGR.

Just to show you how good he was, here's a side by side of Walter Schloss' performance against Buffett and the S&P over their overlapping periods.

What's impressive about both Schloss and Buffett is their ability to have a good year even when the market was down.

(You can also see why Buffett is a legend. His performance speaks for itself. Sure there are lots of ups and downs, but even in his “down” years are still positive.)

Look at the chart and it proves that you can do well independent of the market.

Now what's most impressive about Walter Schloss' record is that he didn't have a college degree.

So how did he do it?

Well let's get into his brain and find out based on the many quotes I've scoured from the internet.

The Schloss Investing Approach – Quick Summary

Philosophy and Style

Investors are best served using a Benjamin Graham value approach, looking for stocks that are hitting new lows and those trading at a price lower than their book value per share.

Universe of Stocks

Stocks are selected from among well-known “Campbell Soup” companies. Exclude foreign stocks and those in industries with which the investor is unfamiliar.

Criteria for Initial Consideration

  • Ten-year track record
  • No long-term debt
  • A low price-to-book-value ratio
  • A stock at or near its 52-week low price
  • High insider ownership

Portfolio Construction

  • Limit holding of one stock to no more than 20% of entire portfolio
  • Well-diversified portfolio of up to 100 stocks
  • Holdings weighted based on their perceived values, putting less money in positions the investor is less sure about
  • Use limit orders to purchase stocks

Stock Monitoring and When to Sell

In general, try for a 50% profit from any holding before selling. If a stock's price is falling and the company's fundamentals are sound, buy more.

Walter Schloss approach summary

Walter Schloss on His Investment Philosophy

Keep things clear and simple. There's no need to chase complicated stocks or situations if you don't understand it.

When it comes to investing, my suggestion is to first understand your strengths and weaknesses, and then devise a simple strategy so that you can sleep at night.

I don't like stress and prefer to avoid it, I never focus too much on market news and economic data. They always worry investors.

You have to invest the way that's comfortable for you.

Try not to let your emotions affect your judgment. Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks.

I think investing...