During his recent interview with Tobias, Justin Carbonneau, a Partner at Validea Capital discusses the performance of some of the greatest investors of all time, and how one investor in particular managed to out-perform Mohnish Pabrai. Here’s an excerpt from the interview:
Tobias Carlisle: Robo. When folks come to the firm, do they say, “For a managed account, I want the Buffett strategy,” or do they say, “I want you to give me the best ideas from all of the strategies for this time of the cycle?”
Justin Carbonneau: We have a set of strategies that are based on combinations of the models that we run. But, we have some clients that either we do custom development for, or if somebody feels very strongly like, “I am a Benjamin Graham disciple, and I want deep, deep value exposure,” we can do that.
It’s just, everything we’ve seen and we’ve talked about it over the last ten minutes, growth or value, any concentrated portfolio of 10 or 20, 30 securities, especially if it’s just one type of strategy, you can be all over the place. We actually try to be very careful with our investors and say, “Listen, yeah, we understand you’re a believer in value investing and the Benjamin Graham intelligent investor, defensive investor model, but you’ve got to have the thickest skin to be able to stick with that strategy.” We do have some clients that have done it. When that turn in value comes, if they’re disciplined, they’re going to get rewarded, hopefully.
Justin Carbonneau: We generally try to do blends is kind of the answer.
Tobias Carlisle: I’m always talking about my book a little bit on this, but I am a believer in value because it appeals to me intellectually, and probably it’s emotional as well, I don’t know. I think it’s a good idea if you believe in a strategy and it does ultimately end up working to stick in, to have this … I met this guy recently. He’s an investor in, he was one of Mohnish Pabrai’s early investors. He has a record that’s better than Mohnish Pabrai because every time Mohnish is down he gives him more money.
Justin Carbonneau: Oh, really. He kind of dollar cost averages it in, but when the strategy’s underperforming … Good approach.
Tobias Carlisle: Mohnish has got a phenomenal record.
Justin Carbonneau: Do you know what’s his long term? Is it in the 20’s or something in terms of return?
Tobias Carlisle: I don’t know. The sort of numbers I thought I had saw, it was thousands of percent. Maybe tens of thousands of percent over a couple of decades, something like that.
Justin Carbonneau: Yeah. The reason I … You guys, it was a chart that you put in your weekly content recap.
Tobias Carlisle: Roundup.
Justin Carbonneau: Actually last week. It’s a chart that I encourage everyone that’s watching this, which hopefully some people watch it, right? To look at, but it’s the chart of it has returns on the y-axis and the number of years on the x-axis, and it shows all these great superstar investors, and where they would be. If you have Buffett, Buffett has 65 years at basically 22% annualized return. He’s way out to the right and pretty high up in terms of the return.
Then you have even guys like Greenblatt and like Lynch. Lynch was 29%, which was phenomenal, but it was 13 years. In terms of the time frame, it’s far less, obviously, than Buffett. I find that chart really fascinating. It does go to show, and we know this, it’s obvious, but how crazy Buffett’s long term performance is. With that being said, if you take the last 20 years for Buffett, it hasn’t been anywhere close to that, but there’s a lot of factors that play into that. I find that chart very interesting. It circulates around. Once every couple years, I see that pop back up.
Tobias Carlisle: Right, I remember it. I had to put on an update because I think everybody’s seen it. There’s another version of it that has guys who aren’t necessarily value investors and there’s some absolutely phenomenal returns on that as well.
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