Interviews With Sam Zell, William Von Mueffling & Michael Karsch: Columbia Business School Newsletter

Columbia Business School is out with the latest installment of its investment newsletter: Graham & Doddsville. Edited by MBA students, the issue features interviews with Sam Zell (Chairman of Equity Group Investments), William von Mueffling (President of Cantillon Capital), and Michael Karsch (founder of Karsch Capital Management).

Below are some excerpts we found insightful:

Sam Zell on key tenets of his investing philosophy: "I philosophically believe that if you can't delineate your idea in one or two sentences, it's not worth doing ... simplicity is critical."


Sam Zell on what has allowed him to be successful: "The definition of a great investor is someone who starts by understanding the downside. You must make the judgment in advance as to how much downside risk you are willing to take. I knew that I could always survive the good days, but the critical element is to be able to survive when the market isn't doing well or the investment isn't performing. I always focus on how much exposure I am taking."


William Von Mueffling on Cantillon's investment style: "One can broadly divide value investing into two camps. The first camp is the Graham & Dodd style which is buying assets at a discount or cash at a discount. The second camp is the Buffett style, which I characterize as buying financial productivity at a discount. We fall into the second camp. We believe that there are many different types of moats to be found, and that a moat around a business should allow it to produce outsized margins and wonderful returns on capital. The trick is being able to buy this stream of cash flows at a discount. Unlike Graham & Dodd investing where you might look at low price-to-book value companies or net-net companies, we are trying to buy high financial productivity at a discount to its intrinsic value."


Michael Karsch on the lifecycle of investing approach: "(It) is a framework that states that markets, industries, companies and stocks typically move through 5 stages over time. These stages are: 1) distressed, discarded and/or undiscovered, 2) value, 3) growth at a reasonable price (GARP), 4) growth, and 5) momentum. The lifecycle analysis and an appreciation for a company‘s evolution through the cycle often lead us to ask whether a company will be perceived as better (up the cycle) or worse (down the cycle) over a reasonable investment horizon."


Embedded below is the Graham & Doddsville issue:




For more from these three investors, we've posted:

- Michael Karsch on risk management

- Sam Zell on Brazil's investment opportunity

- Cantillon converts from hedge fund to long-only

Michael Karsch on Risk Management: CIMA Conference

Continuing the series of notes from the CIMA Conference (Columbia Investment Management Association), we present Karsch Capital's Michael Karsch talking about risk.

Michael Karsch on Risk Management

Gross exposure is more important than net exposure. When you’re not exposed enough, cut your least conviction shorts. When you’re too long, instead of shorting more, cut your least conviction longs.

Sometimes it’s dangerous to be near other hedge funds. Manage your gross carefully, not just your net. Hedge fund stocks did a lot worse than the market in 2008, so you got hurt both long and short. Just by shorting, more gross, less net, was actually higher risk. He did 100% over last ten years vs. SPX 12% over same time.


For the rest of the notes from the CIMA Conference, head to these posts:

- Dan Loeb: Lessons He's Learned as an Investor

- David Einhorn Question & Answer Session

- Bruce Berkowitz's Basic Checklist for Investing & What He's Learned

- Distressed Investing Panel (Dan Loeb & Daniel Krueger)

- Long/Short Equity Investing Panel (Whitney Tilson)

- Bill Miller on What Stocks He Likes Now

- Bruce Greenwald's Market Comments