The Superinvestors of Daily Journal Corporation

Forbes June 22, 2015 0

(Disclosure: the author has a position in the Daily Journal Corporation – a reliable sell indicator.) Value investors know Warren Buffett’s classic retort to efficient market theory, “The SuperInvestors of Graham and Doddsville.” It originally took the form of a speech he gave at Columbia business school on the 50 th anniversary of the publication of Graham and Dodd’s Security Analysis .

(Disclosure: the author has a position in the Daily Journal Corporation – a reliable sell indicator.)

Value investors know Warren Buffett’s classic retort to efficient market theory, “The SuperInvestors of Graham and Doddsville.” It originally took the form of a speech he gave at Columbia business school on the 50th anniversary of the publication of Graham and Dodd’s Security Analysis. If efficient market theory were correct in claiming that all available information is priced into stocks, leaving the market price as the best estimate of true value, Buffett wondered how value investors had managed to beat the market by such wide margins.

This was in 1984. Buffett cited seven individual superinvestors (two others were multi-manager funds). Of those seven, Walter Schloss, Tom Knapp, and William Ruane have departed on that Last Train to Graham & Doddsville. Stan Perlmeter still invests his own account. That leaves three others in the public sphere.

Warren Buffett and Charlie Munger run Berkshire Hathaway (ticker: BRK.A). It has done pretty well. No wonder, you say – two of the magnificent seven superinvestors are showrunners.

But there is one other company on Spaceship Earth with the same distinction: the Daily Journal Corporation (ticker: DJCO). Its board is also stacked with two superinvestors: Charlie Munger and Rick Guerin.

Rick Guerin's Performance

Rick Guerin’s Performance

The Daily Journal is a legal publisher in Los Angeles, spun out in 1986 as a public company from a closed-end fund Munger and Guerin owned. Munger became Chairman (because he was an attorney) with Guerin as the largest single shareholder, and Gerald Salzman – the Platonic form of a Buffett-style manager — taking over as CEO shortly thereafter.

Is there a competitive advantage to having two superinvestors on your board of directors? Possibly. In early 2009, the Daily Journal’s coffers were sloshing with cash from printing foreclosure notices – “undertakers during a plague” is how Munger describes it. They decided to invest it in Wells Fargo stock (ticker: WFC), selling at $8 a share in the dregs of the financial crisis. Why Wells Fargo? “It was too cheap,” explains Munger. I have been unable to conclusively disprove the rumor that this decision took place over a bridge game with Guerin at the L.A. Country Club.


Article originally posted in Forbes website.

Share:Facebook0Twitter0Google+0EmailPinterest0Reddit0StumbleUpon0LinkedIn0Digg

Comments