Warren Buffett on the Thames
Investment banker and now money manager Justyn Walsh
has offered up an overview of the investing style John Maynard Keynes where
aside from running his own personal portfolio he invested the endowment of
Kings College along with several insurance companies. His record as an investor
in the troubled 1930’s was phenomenal.
Walsh recounts the influence of Edgar Lawrence Smith’s
1924 classic “Common Stocks as Long Term Investments” which became the great
intellectual foundation of the 1920’s bull market. In that book Smith
recognized that industrial companies by retaining earnings became compound
interest machines. During the 1920’s Walsh characterizes Keynes as a momentum
investor and in 1929 he paid the price with severe losses.
In the early 1930’s similar to Benjamin Graham he
became a value investor seeking out individual securities that he believed sold
at a discount to their underlying intrinsic value independent of behavior of
the overall stock market. This approach is very similar to that of Warren
Buffett. Keynes, also similar to Buffett, believed in running a concentrated
portfolio where his best ideas would have a real impact. As with Buffett he
believed that less than knowledgeable investors should own a broadly diversified
portfolio.
My main problem with this readable, but somewhat
repetitive book, is that there is no data on the year-to-year performance of
the portfolios he was managing and there is no inkling of what securities he
actually owned. Further he mentions that Keynes had a less than stellar sell
discipline but offers no real proof.
Simply put, Walsh over-promises.
For the full amazon URL see: Warren Buffett on the Thames (amazon.com)
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