The Thrill of Boredom
Tomorrow morning your New York editor will hop a plane to
Colorado, where he hopes to continue perfecting his
aptitude for doing nothing…or at least for doing as
little as possible. He would like to do SOMETHING while he
is away, but he has come to understand how
counterproductive that can be.
The vacationer who does too much, risks exhausting the very
mind and body he should be rejuvenating. Likewise, the
investor who does too much, risks exhausting a portfolio’s
potential to deliver capital gains.
"Do nothing!" the world’s finest investors advise.
Folks like Warren Buffett, Ralph Wanger and Marty Whitman
all hail from the minimalist school of investing. That is,
they all practice a financial version of the Hippocratic
Oath: "First, do no harm."[Editor’s note: Contrary to the
popular misconception, the Hippocratic Oath does not
actually contain this phrase. Nevertheless, "do no harm" is
clearly the sentiment that the oath conveys.] It is perhaps
no accident, therefore, that all three of these gentlemen
have quintupled their investors’ money over the last 12
years, handily outdistancing the S&P 500 in the process.
Warren Buffett is, of course, the founder and chairman of
Berkshire Hathaway (NYSE: BRK/A), the world’s most
successful holding company. Thanks to Berkshire’s many
successes, Buffett has become the world’s second richest
human. Ralph Wanger has never made the Forbes list of
richest individuals, but his investment skills have brought
infinite riches to the owners of his Columbia Acorn Fund
(ACRNX), a mutual fund dedicated to small- and mid-cap
value stocks. Marty Whitman also runs a value-focused
mutual fund. His Third Avenue Value Fund (TAVFX) pursues a
classic Graham and Dodd strategy: Buying well-financed
companies at a substantial discount to their intrinsic
Buffett unabashedly credits his infrequent investment
activity for much of his success. In Berkshire Hathaway’s
1990 annual report Buffett wrote, "Lethargy bordering on
sloth remains the cornerstone of our investment style: This
year we neither bought nor sold a share of five of our six
Wanger advocates a similar approach, as he explained
recently when chatting face-to-face with our own Chris
Mayer. "Most investors over-trade," he says. Instead of
trading, they should be buying "boring stocks" that nobody
wants, then hanging onto them for the long-term. "Give your
stocks time to work," Wanger advises.
Whitman, no surprise, pursues a similar strategy…if we
may call it that.
"You make more money sitting on your ass," Marty Whitman
indelicately explained to Jim Grant recently. "We’re buy-
and-hold. I’ve been in this business over 50 years. I have
had a lot of experience holding stocks for three years;
doubled, and I sold them to somebody else for whom it
tripled in the next six months."
Therefore, Whitman has become slower to pull the "sell"
lever than he used to be. He will readily sell a "grossly
overvalued" security, he says, but steadfastly refuses to
eject a "modestly overpriced" one. Whitman’s unique style
of "ass-sitting" seems to be working. Over the last 15
years, his Third Avenue Value Fund has produced double the
return of the S&P 500 – a nifty 16% annualized.
So what’s this indolent investor sitting on currently?
Japan’s Toyota Industries represents 6.4% of his fund. His
other top-10 holdings include a bevy of real estate
securities like St. Joe Co. (NYSE: JOE), Tejon Ranch (NYSE:
TRC), Brascan Corp. (NYSE: BN) and Hutchison Whampoa (HK:
13). Whitman admits that these securities are not as cheap
as they were three years ago. But he’s content,
nevertheless, to continue sitting on them…just like he
The collective message from Messieurs Buffett, Wanger and
Whitman is very clear; whoever hopes to become a truly
successful investor must learn to do nothing.
Over the next two weeks, therefore, your editor will
endeavor to perfect the art of selective indolence. He will
do something, to be sure, just not very much of it. He will
resist the urge to do too much, no matter how interesting
the possible diversions may be…and Colorado does not lack
for interesting diversions.
My oldest son, Noah, who arrived in Colorado ahead of the
rest of the family, provides the following advance-recon
from a Wal-Mart store near Denver: "Dad, you can’t believe
this place! I’ve been in lots of Wal-Mart stores, but I’ve
never seen one like this…They’ve got peaches and shotguns
in the same store! It’s crazy! One moment Grandpa and I
were buying sweet corn, the next moment we were walking to
the other side of the store to buy shotgun shells. The
place has everything!"
Given the array of possibilities, therefore, your editor
might eat a peach on his vacation, or fire a shotgun, or
fire a shotgun at a peach…But apart from that, nothing
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