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Jeremy Grantham: The Man Who Loves Dogs – 1978 Barron’s Interview

Jeremy Grantham founded GMO LLC in 1977 and remains a member of GMO's Asset Allocation team, serving as the firm's chief investment strategist. Today, GMO manages $117 billion in client assets.

During December 1978, a year after GMO LLC was founded, Jeremy Grantham sat down for an interview with Forbes magazine to discuss his contrarian style. The article was titled "The man who loves dogs" and at the time, GMO was known as Grantham, Mayo, Van Otterloo & Co., with assets under management of only $65 million. Here are the highlights of the interview from the archives.

Jeremy Grantham: The man who loves dogs

"There is a single principle to which all Wall Street would agree it is: Cut your losses and let your profits run...Nonsense, insists Jeremy Grantham, 40, who thinks the best policy is: Cut your profits and let your losses run." -- Forbes 1978

Jeremy Grantham advocates buying more of your losers, averaging down and selling winners early as to book gains. From any normal fund manager running just $65 million, this may have seemed like a silly statement. However, before founding GMO, Grantham had come from a nine-year-old investment firm based out of Boston with $1.8 billion under management. Grantham left because he thought the fund was becoming too big. He said, "if you want to concentrate your money in your best handful of ideas and move quickly, you have to be small."

"Like most younger money managers, Grantham believes that the market is 'pretty damned efficient' -- that is, the market prices stocks at what they are worth at any given moment, which is the sum total of all the judgments based on all the information known to investors and speculators about that stock." -- Forbes 1978

As a result, Grantham didn't believe that there were any bargains to be found in the market. A $50 stock is worth $50. That said, some people can find bargains, but they do this by making intelligent, informed decisions about the future.

He says...