CKBlog: Strategies

Tuesday, May 09, 2023

My Pilgrimage Back to Gabelli, Buffett, and Value Investing

Last weekend I traveled to the Berkshire Hathaway annual meeting, the “Woodstock for Capitalists.” A visit with the “Oracle of Omaha.” By way of background, I have never been to the meeting. However, in 1996 I got my first job as a stock researcher working for famed value investor Mario Gabelli. At the time I didn’t know what an EBITDA multiple was, and I certainly didn’t truly understand the discipline of value investing. I was accepted to Columbia Business School and deferred my acceptance until 1997 so I could begin pre-education under the tutelage of Mr. Gabelli. I was the gaming & lodging analyst and on my first day Mr. Gabelli handed me two things and told me to read them cover to cover: A Hilton Hotels annual report and a copy of Security Analysis by Graham and Dodd. It was the Fifth Edition, co-authored by Professor Roger Murray of Columbia Business School. Professor Murray had been Mr. Gabelli’s Value Investing professor at Columbia. Ben Graham had been Warren Buffett’s professor at Columbia. I also noted some marketing material in the office that read: Graham & Dodd + Buffett + a Catalyst = Gabelli. I was hooked.

Fast forward 27 years. On the plane ride out to Omaha I had the good luck to be seated next to Whitney Tilson. I met Whitney some twenty years ago, but don’t really know him. As you would expect from two investors traveling to the same event we chatted about ideas, among other things. Over the course of my career these one-off conversations have always sparked some of my best investments. Whitney gave me some stuff to work on and I hope he found my contributions valuable.

On Friday evening at the Hilton in Omaha I attended the Columbia Business School (CBS) Graham & Dodd dinner, sponsored and hosted by Mario Gabelli. From across a crowded room, Mr. Gabelli saw me and waved me over. We embraced and he asked, “how long has it been?” I sat at the Gabelli table with a former colleague and current Co-CIO Chris Marangi. Chris is a fabulous investor and I always learn something when I spend time with him. The panel at the dinner consisted of Mr. Gabelli, Paul Hilal, Elizabeth Lilly, and Tom Russo and was moderated by Tano Santos, the current Faculty Director of the Heilbrunn Center for Graham & Dodd Investing at CBS. Each of the panelists shared their market views and finished with a stock pitch. More ideas to follow up on!

I rose at 5:30 a.m. on Saturday to be ready to get in line at the convention center. I traveled to Omaha from Connecticut with a dear friend from home, Jason Van Dussen. Jason was meeting his lifelong friend from Michigan, Chad Bush. Chad had his sophomore in college son Benjamin in tow, along with his colleague Miles and two nephews. JVD is a banker in NY but has been a Buffett junkie since before his time at Columbia Business School. In fact, he and Chad were turned onto Buffett by a teaching assistant when they were undergrads at Michigan State. Like any good parent, they have shared their knowledge with their children, who seemingly have caught the Buffett bug. Benjamin was in a suit!

The Berkshire Hathaway annual meeting will be well covered by the mainstream press, so I won’t waste much time discussing the content of the fascinating six-hour Q&A session. There were a few nuggets that stood out:

• Don’t make emotional decisions when making business or investment decisions.
• Avoid “de-worse-ification” in your portfolio.
• Ben Graham did all kinds of things for Warren Buffett “with no expectation for anything in return.”
• Get toxic people the hell out of your life.

And lastly, while it was not part of the content delivered by Buffett or Munger, I was simply fascinated that two gentlemen in their 90s (Munger is 99) had the physical and mental stamina to endure six hours of questions. And their encyclopedic knowledge of a wide range of topics is just remarkable. Like Jason commented to me after, “it’s not like they are sitting up there with a computer and Google in front of them.” We should all be so lucky to operate like this into our 90s.

As I listened to the things that were said by Munger and Buffett that resonated with me, I couldn’t help but draw comparisons as to what attracted me to CastleKeep. First and foremost, we are like-minded investors that have been BRK disciples for years. We don’t make emotional business or investment decisions, as most recently evidenced by our analysis of the banking crisis sparked by SVB. We also often do certain things for our clients “with no expectation for anything in return.” And we definitely try to keep toxic people out of our lives.

Finally, as I look back over the weekend, I think the thing I valued most was spending time with and learning from others that attended the meeting. By definition, you are going to be immersed among others that have a similar investment philosophy. But for me, spending quality time “nerding out” with my friend Jason Van Dussen was awesome. His friend Chad Bush is building what I view as a “mini-Berkshire” in Spring Lake, Michigan. Chad has a portfolio of operating businesses and is also making public company investments, all under the umbrella of his investment firm Coach Road Capital. His colleague Miles told me the story of his first investment where he turned $25k into $1 million+. Miles is 22 years old by the way. I would never have had these experiences had I not traveled to Omaha. I am grateful I did.

In my library at home, I still have that copy of Security Analysis, and I check in on it occasionally. As Buffett pointed out during the meeting, there are thousands of books written about investing. The Intelligent Investor by Ben Graham was first published in 1949 and remains in the top 300 Amazon bestsellers each year. It is timeless and every serious investor should read it and revisit it. Security Analysis was the precursor to The Intelligent Investor. I didn’t know it at the time, but the copy Mr. Gabelli had given me was signed by Professor Roger Murray. What a treasure!

Disclaimer: CastleKeep, its employees and clients may own shares of Berkshire Hathaway, Inc. from time to time. The above is for illustrative purposes only and is not a recommendation to buy or sell the stock. Consult with your advisor for specific investment advice.

Mike Benevento
Partner
CastleKeep Investment Advisors LLC