In his recent article titled – Five Times Lucky, Charley Ellis discusses his 300x bet in Berkshire Hathaway. Here’s an excerpt from the article:
Meal ticket. My third winning experience was the best. I was pleased to be invited to lunch by Sandy Gottesman, the much-admired senior partner of First Manhattan and one of Greenwich Associates’ clients. I hoped this would give me an opportunity to get him to adopt our recommendations for the firm’s stockbrokerage business.
As we sat down at his regular table at his club, Sandy said, “We are not going to renew our engagement with you in stockbrokerage this year and I’d like to tell you why. Our research is focused on creative investment ideas, but your research shows that institutions want us to organize around coverage of whole industries. We don’t want to do that. You also show that clients want us to get into block trading, which we also do not want to do. It’s too risky for us.”
I was about to offer Sandy our program on investment management for large corporate pension funds, but he said, “I know you have a great program on big pension funds, but that’s not our market. We focus on smaller funds.”
The conversation was effectively over and our lunch orders hadn’t yet come. To fill the void, I said, “Sandy, thank you for being so open and courteous with me about your decision.” Then, knowing Sandy was a very successful investor, I asked him to share his experiences with great investments.
He replied with one word: “Berkshire.”
I had heard about Warren Buffett and the Buffett Partnership, so I asked, “How long have you invested in Berkshire Hathaway?”
“A long time.”
“How long would you expect to continue owning it?”
While we ate our lunch, Sandy told me the Berkshire story, about how Buffett took control of an ailing New England textile company in 1965 and turned it into the vehicle he used to make a slew of extraordinarily successful investments, with an early focus on insurance. He then used the insurance company “float” to make further investments, eventually building what today is one of the world’s largest companies.
Lucky as Sandy’s recommendation was, it was actually perfectly matched by a fortunate situation. My partners and I had agreed to create a reserve fund in case our small firm ran into a bad earnings situation, so we wouldn’t have to each scramble to put up more capital if we had an operating loss. The fund was only $100,000, but we thought that would be enough, if and when an emergency developed.
The money was raised by simply slow-paying our year-end bonuses by a few months. We had agreed that the money would be invested in safe stocks and that I would recommend the portfolio. By the time Sandy had finished his reasoning for holding Berkshire Hathaway forever, the obvious move was to invest the whole fund in Berkshire. The result over nearly five decades has been superb—more than 300 times our cost.
You can read the entire article here:
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