Some years ago Charlie Rose did a great interview with investing legend Julian Robertson in which he discussed a strategy that involved investing in the best 200 companies in the world. Here’s an excerpt from the interview:
Charlie Rose: You once said that your investment philosophy is to find the 200 best companies in America and invest in them.
Julian Robertson: In the world.
Charlie Rose: In the world.
Julian Robertson: Right.
Charlie Rose: In the world– big point. And find the 200 and go long and invest in them, and find the 200 worst companies in the world and go short.
Julian Robertson: That’s exactly right. And it’s a very simple system.
Charlie Rose: –get to that.
Julian Robertson: And if it doesn’t work, you really ought to get out of the business.
Charlie Rose: Well, then, how did– what’s your test for finding those 200 best companies in the world? How do you– what’s the barometer you use to say, ”We’re willing to take the hard-earned money of my investors and my risk and my reputation and back ’em”?
Julian Robertson: Well, I think the main thing is management, getting good management, and checking with their competitors, checking with their compatriots, their suppliers, and finding out, really, if they are good. And then the next thing is to equate their business with their price, and then you kind of come up with a risk model, and you say, ”Well, I think this thing has 100 percent of the up side and maybe 10 percent on the down side.” That’s a pretty good set-up.
Charlie Rose: I’d say, yes!
Julian Robertson: Now, we miss a lot of them using this scenario. I mean, you pointed out we’ve missed G.E., which is correct, and no one would say that that wasn’t a beautifully managed company. And that’s because– we missed G.E. because it’s always been a very high-priced stock, priced high in relations to earnings and dividends, but– so we’re really trying to find bargains that are well managed.
You can watch the entire interview here:
For more articles like this, check out our value investing news here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple: