Tweedy Browne’s John Spears – Boring Companies & Outsized Returns

During his recent interview on the RWH Podcast, John Spears of Tweedy Browne discussed boring companies and outsized returns. Here’s an excerpt from the interview:

John Spears: I think there’s some wisdom in that. I mean, I always, for myself, when I have a choice of buying something or not, my framework is comparisons.

And let’s say I find something, I don’t know, like Tesco, I own Tesco personally in my own account, and there’ve been insider buying in it.

It seemed pretty low price, earnings ratio, pretty good dividend yield. They own a lot of their own stores in fee. They’re not all leased stores, so there’s a value in the real estate. I felt very comfortable with that. I’m less comfortable personally with the tech companies that the dictator of China seems to be going after. I mean, comparison, do I have to buy in my own account Alibaba? I don’t have to do that.

I can buy dull old Tesco. Now, which one will do better? I don’t know. I don’t know. Obviously, the firm thinks that these companies are worth holding and they do value… low valuations are part and parcel to behavioral aspects to people feeling negative about things.

So these stocks could be great. It would be arrogant and obnoxious of me to say that they won’t be great, that they’re, you know… So, I don’t know. I do own a few shares of a company in China, Haitian group, which-

Green: And that’s another one where there was insider buying. I remember you saying-

Spears: Plastic moulding equipment and stuff. Yeah. And that was CEO buying and I think that’s a little bit more of a business that might be off the radar as a business that the Chinese Communist Party wants to attack. So I don’t know. I don’t know. But it’s interesting because comparisons, comparison always compare.

Green: Yeah. And you’re also setting yourself up to do well on average over time with a portfolio of stuff that’s cheap. So you don’t need everything to work out. You just need on average to be right over time.

Spears: Exactly. The way I think of it is, as on a group basis, you own a number of these things, you’ll do okay, you’ll make money, you’ll have a satisfactory return, you’ll sleep at night. You’ll have an inherent theoretical, see through to the business versus the stock price margin of safety.

You can watch the entire discussion here: