Value-investing gems sparkle below the surface
Executive | Dec 02, 2016 | Gabelli School of Business
You never know until you look below the surface.
According to Meryl Witmer, managing member of the general partner of Eagle Capital Partners L.P. and board member of Berkshire Hathaway Inc., the ability to examine every part of a business is key to determining a company’s true value and, in turn, finding the diamonds in the buckets of quarters.
Her investment philosophy is built around limiting risk and investing in strong businesses with great free cash flow characteristics, at a significant discount to their intrinsic value, with great management teams who intelligently allocate capital, Witmer explained through tales of the many companies with which she has worked. This methodology is one she trusts, as it holds up in both theory and reality.
During her presentation at the Lincoln Center campus, sponsored by the Gabelli Center for Global Security Analysis, Witmer illustrated the lessons she has learned as a value investor. She has worked with some of the best in the field, including Warren Buffett and Fordham’s own Mario Gabelli, who joined her during the question-and-answer portion.
She described successful investing as the ability to “bring a sharp pencil and leave emotions at home,” or rather, understand the language of the business and recognize the financial opportunities in challenging circumstances. “When everything looks bad, often that is the best time to buy. That’s when you need ice water running through your veins in order to take the risk.”
Before buying, though, she explores every corner of a company, never trusting what someone says until she speaks to the primary source and examines the numbers herself. The ultimate test, she says, is where a stock is trading and what it is worth.
“Whether it’s stocks or socks, I want to buy when it’s marked down.”
Value investing is known for requiring patience and diligence. At the start of her career, Witmer learned from Gabelli that an investor shouldn’t work nine to five. “You have to work five to nine if you want to make it happen.”
For students with value-investing ambitions, Witmer emphasized again that it all comes down to digging below the surface.
“One more swing of the ax, one more dig, and you could find your diamond.”