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Terrific Arnold Van Den Berg Interview!


Parsad
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Gurufocus had a very good interview with Arnold Van Den Berg, founder of Century Management.  He lumps Prem in with Ben Graham, Warren Buffett, John Templeton, Phil Fisher, Seth Klarman, et al.  Very high praise from a legendary investment manager.  Cheers!

 

http://www.gurufocus.com/news/135105/gurufocus-interview-with-investor-arnold-van-den-berg-comments-on-csco-msft-tol-mdc-dell

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Gurufocus had a very good interview with Arnold Van Den Berg, founder of Century Management.  He lumps Prem in with Ben Graham, Warren Buffett, John Templeton, Phil Fisher, Seth Klarman, et al.  Very high praise from a legendary investment manager.  Cheers!

 

http://www.gurufocus.com/news/135105/gurufocus-interview-with-investor-arnold-van-den-berg-comments-on-csco-msft-tol-mdc-dell

Just curious. If you were an investor and started investing 10 years ago and had this kind of a record if you would call this very good?

 

  Your return net of fees              S&P 500 adjusted

 

10 yrs    5.08%                                3.25%

 

  5yrs      0.05%                              2.54%

 

  3 yr      1.39%                              2.26%

 

  1yr      11.73%                              15.29%

 

This was taken from CM Value 1 from the Century Management web site. Irrespective of the great long term history of this firm, have many members of this forum done better than this for the last 10 years? I know I wouldn't have been very happy with myself if this is all I could do.

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Just curious. If you were an investor and started investing 10 years ago and had this kind of a record if you would call this very good?

 

- The average investor looks after a portfolio less than $0.5M...he looks after $2B!

- The average investor has no restrictions on concentration.

- The average investor has little in the way of frictional costs (admin, staff, legal, accounting, audit, etc)

- The average investor has a much larger universe of investments to choose from

 

Cheers!

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Arnold has beaten the market and the market beats most pros and amateurs.

 

This being said, he is definitely not in the superstar league. There are many pros that do 5 points over the market over a long-period and there is even a decent (in absolute terms, not as a percentage) that do 10 points or more.

 

 

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Agreed with all the statements regarding Berg's ability. However, I do wonder how someone who appears to be so thorough in process maintains such a modest spread over the S&P. Presumably he requires a valuation haircut and conservatively assesses business results, so is he simply making a lot of errors to erode the margin of safety? Or demanding too little in the way of discount?

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An important point is that the ability to effectively teach and manage money are two different skills.  Very few have both (Buffett and Watsa) but many effective teachers have middle of the road performance (think Tilson).  Therefore, it is important to listen and evaluate the logic of the statements almost indepedent of investment performance.  He may also be under the constraints Sanjeev mentioned earlier.  I was listening to Berkowitz speaking at the Morningstar conference and he said he preferred AIG, GS and BAC to all other financials but was forced to include others in his fund due to diversification rules.

 

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The topic "Terrific Arnold Van Den Berg Interview!", is encountering the typical distractions and verging off course as is typically done on Wall Street.  Value investors need to focus and stay the course that guide us to outstanding returns on capital, by adhering to the the principles of the master investors.

 

Concentrate on Value Investing Principles of Success

 

1. Always Use a Business Approach

2. Always Use a Margin of Safety

3. The Market Acts Like a Manic-Depressive        http://www.centman.com/principlesList.html

4. Price Determines Return

 

Warren Buffett's Investment Principles

 

 

Stock investments should be looked at in the same way as buying a business. The stock investor is really buying a tiny share or partnership and should apply the same principles that they would in buying a business – the Benjamin Graham approach:

 

1. The company should be soundly managed. Tests of good management include:

 

    Share buybacks

    Good use of retained earnings

    Sticking to what you know

 

2. The company has demonstrated earning capacity with a likelihood that this will continue. Tests of earning capacity include:

 

    Company growth

    Dealing with inflation

    Capital expenditure

    Look through earnings

    Brand names

 

3. The company should have consistently high returns. Warren Buffett would look at both:

 

    Returns on equity

    Returns on capital

 

4. The company should have a prudent approach to debt.

 

5. The businesses of the company should be simple and the investor should have an understanding of the company.

 

See case studies

 

6. Assuming that all these thresholds are satisfied, the investment should only be made at a reasonable price, with a margin of safety. This is always a matter for independent judgment by the investor but it is relevant to consider:

 

    Price/earnings ratios

    Earnings and Dividend yields

    Book value

    Comparative rates of return

 

8. Investors need to take a long term approach.

 

http://www.buffettsecrets.com/buffett-investment-principles.htm

 

If you had been an investor for 39 years and the first 29 you had been with Century and very pleased but for the last 10 years you had the record that they have posted on their site how much more patience would you say you should have? Could possibly some things have changed that is reflected in the last 10 years record that were not quite the same in the prior 29 years?

    Would you or they be satisfied with this record if this was Buffett, Berkowitz, Watsa, or yourself doing the investing? Would Buffett hire this firm to manage some of his money?

    With that said, I really do like many of the stocks he is buying now. He just may turn his recent record around. He is a really decent man. I have talked with him before and he is I believe a really honest and caring money manager. BUT. The proof is in the numbers and for the last 10 years (By their own web site) they don't seem to be cutting it. If you had given him money to invest 10years ago saying he had just started a money management firm would you be still with him?

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