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The Story of Warren Buffett
THE YOUNG AND THE BRAVE
THE STORY OF ALEX BOSSERT ately, one of the first people to show up at the Berkshire annual meeting is Alex Bossert, an 18-year-old student at Cathedral High School in St. Cloud, Minnesota. Arriving at the site around 4:00 a.m., Bossert makes a day of it. The meeting in 2009 was his fourth one. “I’ve been investing since I was 10 and read my first book about Buffett when I was 13,” he said. “When I was 13, I was at Barnes & Noble and the first book I pulled out was How to Pick Stocks Like Warren Buffett by Timothy Vick. I had no idea Alex Bossert who Warren Buffett was, but I read it, and it sparked my interest in investing. I had read many books on investing before that, but none made much sense. I’ve read everything I can on Warren Buffett since then. “About that time, I bought one Class B share [of Berkshire] by saving every penny I made from summer jobs, birthday money, mowing lawns, shoveling, etc. I purchased the one share at $2,284 and still hold it today,” Bossert reveals. Bossert is known for his writings on his blog site: http://alexbossert. blogspot.com. There he stated, “I follow the investment principles used by Warren Buffett, Ben Graham, Edward Lampert, Charlie Munger, Joel Greenblatt, and other successful investors. I attempt to learn everything I can about investing/business in hopes of eventually starting my own investment fund. “I started my Alex Bossert’s Thoughts on Value Investing to keep track of my portfolio and to write about value investing-related topics,” he explains. “I write a report on each company I invest in, and if I find something interesting on the Internet related to value investing, I pass it on to my readers. One of my first posts was an analysis of Buffett’s investment in First Industrial Realty Trust that he made in his personal portfolio in 1999.” Bossert tracks investment ideas coming in from such investors as Seth Klarman and Mohnish Pabrai. Regarding Klarman, Bossert wrote, “A friend sent me a video of a speech given by Seth Klarman at the Columbia Business School. Klarman’s hedge fund, the Baupost Group, has done over 20% a year
(Courtesy of Alex Bossert)
since he founded the firm in 1983 with only one down year. Also, Seth Klarman’s book Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor is also one of the best books I’ve read on value investing. It’s currently out of print and selling for about $1,600, but I got a copy through my library’s intra-library loan program. “For my personal portfolio, I’m generally looking at small companies that are being overlooked by large institutions. I’m trying to replicate what Buffett did back in his partnership and early days running Berkshire. Smaller companies are many times misunderstood and overlooked and at the same time may be very cheap. Some may trade for single-digit free cash flow or p/e yields, below cash or significantly below book value. I just read all the annual reports I can find, and the latest 10 Qs. I search the Internet, talk to management, which is very easy at small companies, read what other bloggers say about the company, ask friends to research it and see what they think—just trying to get all the information I can. I also find it useful to look at what other value investors are buying.… Eventually I want to run other people’s money.” ERIC SCHLEIEN: DORM ROOM HEDGE FUND Eric Schleien, 21, began a friendship with Bossert in 2007 when they met at the Yellow BRKer meeting. Schleien runs a hedge fund, ElS Capital Partners, LLC, which he started in his room at Babson College in Wellesley, Massachusetts. He later transferred to the University of Buffalo. He said: I’ve been interested in investing since I was 11 years old. I started out reading (Courtesy of Eric Schleien) a Motley Fool book called Investment Eric Schleien Guide for Teens, the teens guide to having more money than your parents (or something like that) and as an 11 year old that was very enticing to me for the novelty of it all. That book mentioned investors and then I would read about those investors. I read about Lynch, O’Neill, and then when I read about Buffett, that’s when it really clicked. So I started reading more and more books about Buffett. Then they’d always mention Graham and the Intelligent Investor … so I read some Graham and his book the Intelligent Investor as well. At the end of the day, value investing was what made the most sense to me.
Of Permanent Value
The Young and the Brave
For my high school graduation present, I decided I wanted to go to Omaha. So me and my dad headed off to Omaha in 2006. It was a wonderful experience. Being in the presence of Buffett and Munger and listening to them speaking was just like everything I had read about and here they were in person. I got invited to play bridge with Buffett, but unfortunately I didn’t know how to play bridge. I asked the woman who was one of Buffett’s friends if she could teach me for tomorrow and she goes, “No its not a game I can teach you in a day so you’re out of luck,” and then I never saw her again. What’s a key thing in my opinion to take away from it, is my passion for value investing came from my inspiration from Berkshire Hathaway and Buffett. This is just another example of how Buffett has created a culture that empowers others to do this kinda stuff. As Charlie said when they get even larger, Berkshire can create a culture that does more than this and actually help transform humanity. SCOTT DINSMORE AND MIKE MCCOY Scott Dinsmore, 27, who went to the University of California Santa Barbara and Mike McCoy, 28 (whose birthday is on the same day, as Buffett, August 30), who went to the University of California Davis, have been learning about Warren Buffett and Berkshire Hathaway for the majority of their lives. Dinsmore also studied at the London School of Economics and McCoy at Cambridge and that’s where they really got to know one another. As childhood friends, classmates and eventually colleagues, they scoured just about every book they could find on the topic of value—Buffett, Charlie Munger, Ben Graham, Mohnish Pabrai, and Joel Mike McCoy, right and Scott Dinsmore The duo, now veteran annual meeting attendees, Greenblatt. Eventually they take in the annual meeting in 2011. picked up a couple of class B
(Courtesy of Scott Dinsmore)
shares and made it to their first shareholders meeting in 2007. It would be the weekend that changed their careers (and much of their lives) from that point forward. After hearing Buffett and Munger all day on Saturday and meeting guys like Pabrai and Whitney Tilson among so many other like minded value gurus, it became clear to them that running an investment partnership was the best way to apply their passions to life. Dinsmore and McCoy are fans of and have met with former Stanford University student Tim Bliss, an investor who heads Investment Group of Santa Barbara. “He’s the one who got us on track,” Dinsmore says. The initial plans for their new business were sketched out on the plane ride home from Omaha that year. Dinsmore and McCoy planned, worked with lawyers, and convinced some supportive friends and family to trust them with a small portion of their capital. By the end of 2008, Cumbre Capital Partners LLC, of San Franscisco now, had been formed and was ready to launch just as the U.S. economy and credit crisis was nearing its darkest hour. Seeing the environment as the best opportunity in their investment history to find bargains, they launched their fund on January 1, 2009, with $340,000 under management. Cumbre Capital Partners is named after La Cumbre Peak in Santa Barbara, California, where the fund was founded. Mostly unknown by locals despite “hiding in plain sight,” Cumbre Peak is the tallest and most impressive peak in Santa Barbara County. Cumbre Capital seeks out similar situations in the marketplace—market leaders and opportunities in ignored or out-of-favor niches. Mike and Scott’s fund, which owns some Berkshire shares, was inspired by the original Buffett Partnerships of the 1950’s and 60’s and is structured almost identically to Buffett’s original partnership rules including charging no management fee and requiring a 6% hurdle before any performance fees are charged for running the fund. Scott and Mike continue to attend the Berkshire meeting each year and in 2009 Scott took the liberty of using his shareholder discount to buy his girlfriend of 7 years an engagement ring at Borsheims only after receiving a letter from Buffett offering his advice for the purchase. Dinsmore spent about 6% of his net worth on the ring—in line with what Buffett has said he did and what he suggested Bill Gates do. Cumbre Capital’s first year in business was 2009 and they could not be more excited with the progress thus far—closing the year with a net return to investors of 31% and over $1.2 million under management. And even more importantly they are working with people they admire and respect, are doing something they love and have the most valuable mentors in the world in guys like Buffett and Munger.
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