Walter Schloss

Overview

Walter Schloss (1916-2012) was one of Benjamin Graham's most successful students, renowned for his pure Graham-and-Dodd approach to investing. He ran his investment partnership for 47 years, achieving an impressive annual return of approximately 20% without using leverage or charging high fees.

Investment Philosophy

Walter Schloss was a true disciple of Benjamin Graham. His approach was simple but effective:

• Net-net investing: Buy companies trading below their net current assets
• No leverage: Never borrowed money to invest
• Diversification: Held hundreds of positions to reduce risk
• Patience: Willing to wait years for the thesis to play out

Schloss ran one of the most concentrated value investment operations, typically holding 100+ positions. This diversification was unusual among Graham followers, who often concentrated in a few cigar butts.

The Track Record

Over 47 years (1956-2003), Walter Schloss achieved remarkable results:

• Annualized return of approximately 20%
• Outperformed the S&P 500 in most decades
• No years of catastrophic loss
• Consistent with Graham's teachings throughout

This record is even more impressive considering Schloss worked with a much smaller capital base than most institutional investors, which would typically constrain returns.

Buffett's Endorsement

Buffett endorsed Walter Schloss at the 1984 Columbia Business School symposium, placing him alongside other Graham disciples like himself:

"Walter Schloss has a remarkable record over 28 years, and he has no trouble making money. He does it in a way that is different from the way I do it. But I would not be surprised if Walter's record is better than mine."

This endorsement is remarkable: Buffett publicly stating that his fellow student outperformed him over a multi-decade period.

The Approach

What made Schloss unusual was his consistency. While many investors evolve their approach over time, Schloss remained faithful to Graham's principles throughout his career. He:

• Avoided technology and complex businesses
• Focused on simple, quantifiable situations
• Was willing to sell when prices reached intrinsic value
• Reinvested proceeds in new cigar butts

His willingness to own 100+ positions simultaneously provided natural diversification that protected against the inevitable losers.