STREET DOGS

From William Bernstein at cfainstitute.org: Benjamin Graham, John Templeton and David Swensen made their mark not in the best-lit chambers of the world’s securities markets, but rather in their undiscovered nooks. Graham didn’t have instant online access to the balance sheets of thousands of companies.

In that era, such data could be a closely kept secret that not infrequently required getting on a train to a distant city and sweet talking an executive’s secretary. Perhaps his greatest triumph came when he found, before any other outside shareholder, Northern Pipe Line’s huge cash hoard and managed its deft disgorgement.

How many US investors do you imagine travelled to Japan before World War 2 looking for stock bargains? Templeton did, and the valuations he found popped his eyes out. Alas, in those days the Japanese authorities didn’t look kindly on Americans shopping for company shares, and he came back home empty-handed.

Soon after he noticed that small-cap companies sported attractive valuations. He decided to purchase 100 names, and since in those days such shares generally traded by appointment, this meant calling in some favours. Within four years, he had quadrupled his money. After the war, he returned to Japan. Foreigners were now allowed to invest, and he hoovered up bargains that yielded high returns for his funds’ shareholders.

Swensen broke new ground in the alternatives arena with his book Pioneering Portfolio Management. Alas, all too many of those who tried to replicate his success focused on the last two words in that title, not realising that the most important word was the first. Those who simply parroted Swensen’s alternativerich asset allocation failed to realise that the trick was in doing so ahead of anyone else.

In short, Graham, Templeton, and Swensen succeeded by arriving early at the banquet table.