Walter Schloss
Value investor who worked under Benjamin Graham
Born 1916 • Passed away 2012
Ran a small partnership for decades using plain statistical value investing, working from published financial statements rather than company meetings.
Biography
Walter Schloss, born in New York in 1916, was an American investor who ran one of the longest-lived value partnerships in the business while doing almost none of the things the industry considers essential. He started work on Wall Street in 1934 as a runner, delivering securities between offices, and took Benjamin Graham's evening courses at the New York Stock Exchange Institute.
After serving in the army during the Second World War he joined Graham-Newman, Benjamin Graham's investment firm, where he worked alongside Warren Buffett. In 1955 he left to start his own partnership with a small pool of capital from nineteen investors, and he ran it until 2000, later continuing to invest his own money.
His method was deliberately narrow. He bought companies trading below their tangible book value or otherwise cheap on published figures, held a long list of positions rather than a concentrated few, and sold when a holding approached what he judged to be fair value. He worked from annual reports and statistical services, did not visit companies, did not talk to management, and for most of his career did not use a computer.
Warren Buffett named him in the 1984 essay The Superinvestors of Graham-and-Doddsville as one of the investors whose records he pointed to when arguing that value investing was more than luck. Schloss was born in 1916 and passed away in 2012. He also left behind a widely reprinted one-page list of the factors he thought mattered in the stock market.
Career timeline
- 1916Born in New York City.
- 1934Starts on Wall Street as a runner, delivering securities between offices.
- 1930sTakes Benjamin Graham's evening courses at the New York Stock Exchange Institute.
- 1946Joins Graham-Newman, where he works alongside Warren Buffett.
- 1955Leaves to start his own partnership with capital from nineteen investors.
- 1973His son Edwin joins the firm, which never grows beyond a two-person operation.
- 1984Named by Warren Buffett in The Superinvestors of Graham-and-Doddsville.
- 2000Returns outside capital and continues investing his own money.
- 2012Passes away at the age of 95.
Investment philosophy
Schloss trusted published numbers and distrusted stories. His reasoning was that a company's audited statements are the same for everyone and can be checked, whereas a conversation with management delivers an impression that cannot be verified and is difficult to discount for enthusiasm. Removing that input made his process narrower but also more repeatable.
He bought assets rather than earnings. A company trading below the value of what it actually owns gives a buyer a cushion that does not depend on next year going well, whereas paying for expected earnings requires the expectation to be correct. That preference is why his portfolio usually looked unglamorous and often contained businesses in visible difficulty.
Because any individual cheap company might simply be a bad one, he spread capital across a long list of positions rather than concentrating. His protection came from the statistics of a diversified basket and from the discount he paid, not from being confident about any one holding, and he was content to be roughly right many times rather than exactly right occasionally.
Key ideas
Tap any idea to expand a plain-English explanation, why it matters, and where to learn more.
Buy assets, not earnings
Paying less than the value of what a company already owns, rather than paying for profits it is expected to make.
Assets on a balance sheet exist now and can be counted. Future earnings are a forecast, and a forecast is where most investment mistakes begin.
A company whose shares trade below the value of its net assets offers a cushion that does not depend on the next few years going well.
Work from public filings alone
Building the entire investment case from annual reports and published statistical services, without meeting management.
Published figures are auditable and identical for every investor. An impression formed in a meeting is neither, and it is very hard to discount for charm.
Schloss ran his partnership for decades without company visits, using annual reports and a subscription statistical service.
Diversify inside a narrow style
Holding a long list of statistically cheap companies rather than concentrating on a few high-conviction ideas.
Deep value buying accepts that some holdings are cheap for good reasons. Spreading across many of them lets the average work while limiting the damage from any single failure.
His portfolios often held far more names than a concentrated manager would consider reasonable, precisely because he was not relying on being right about any one of them.
Have the courage of your own analysis
Sticking with a decision made on the numbers when the market and the news are saying the opposite.
A cheap share is usually cheap because something has gone wrong and the reporting is negative. If bad news changes your mind by itself, you cannot buy cheaply.
Buying a company in visible difficulty means holding it through the period when everyone can explain why it deserves its price.
Process beats access
The idea that a simple rule applied consistently for decades can outweigh information advantages and industry contacts.
Access is expensive and unevenly distributed. A repeatable process costs nothing and does not degrade when a contact retires.
A two-person office with no research staff produced a record that Warren Buffett cited when arguing value investing was a discipline rather than luck.
Major contributions
- Demonstrated over 45 years that a plain statistical value process could be run consistently without research staff, company access or forecasts.
- Provided one of the long-running records Warren Buffett pointed to in The Superinvestors of Graham-and-Doddsville.
- Kept Benjamin Graham's original balance-sheet approach in continuous practical use long after most of the profession had moved on from it.
- Left a short, widely reprinted list of the factors he considered necessary to make money in the stock market.
- Showed that a very small operation can compete without scale, technology or information advantages.
Major successes
- Ran his own partnership from 1955 to 2000, one of the longest continuous records of a single value process in the business.
- Was named by Warren Buffett in 1984 as one of the investors whose records supported the case for value investing as a discipline.
- Operated for most of that period as a two-person firm, without analysts, company visits or a computer.
- Returned outside capital on his own terms in 2000 rather than growing the firm into something the process could not support.
Influence on investors
Schloss is the strongest available argument that a value process does not require an information edge. He had no research department, no meetings with executives and no proprietary data, and the fact that the record still stands is why he is cited whenever someone claims that individual investors cannot compete.
His example also shaped how later investors think about capacity. He deliberately kept the operation small rather than gathering assets, on the reasoning that the strategy would stop working at scale, and that trade-off is now a standard consideration when judging any manager.
Criticisms and debates
A balanced view includes the main criticisms and open debates, presented neutrally.
- The deeply cheap companies his approach depended on have become rare in developed markets, so the same screen run today produces a much thinner list.
- Refusing to talk to management means missing qualitative deterioration that will not appear in the accounts for another year or two.
- Tangible book value has become a weaker measure of worth as more company value sits in intangible assets such as software, brands and research.
- Owning a long list of statistically cheap companies means deliberately owning some poor businesses, and the approach can lag badly during long growth-led markets.
- The record was built in an era with less public information and fewer competing analysts, so the same gaps are unlikely to be as available now.
Lessons for investors
Plain-English takeaways. Context for learning, not advice to buy or sell anything.
- 1A simple process you can repeat for decades can outlast a clever one you cannot.
- 2What a company owns today is easier to verify than what it might earn tomorrow.
- 3If bad news alone changes your mind, you will never buy anything cheaply.
- 4Staying small is sometimes what keeps a strategy working.
Notable quotes
“Try to buy assets at a discount rather than buying earnings.”
Context: Schloss meant paying less than a company's assets are worth rather than paying up for its profits. The distinction needs the vocabulary to land.
“Have the courage of your convictions once you have made a decision.”
Context: Schloss was arguing against being shaken out by price swings, not against changing your mind when the facts change.
Frequently asked questions
Who was Walter Schloss?
Walter Schloss was an American value investor, born in 1916, who worked at Benjamin Graham's firm and then ran his own investment partnership from 1955 until 2000 with almost no staff.
What was Walter Schloss known for?
He is known for a plain statistical approach to value investing, working entirely from published annual reports, never visiting companies, and running a small two-person operation for decades.
How did Schloss pick stocks?
He looked for companies trading below their tangible book value or otherwise cheap on published figures, bought a long list of them, and sold as each approached his estimate of fair value.
Why did he refuse to meet management?
His view was that audited figures can be checked and are the same for everyone, while an impression formed in a meeting cannot be verified and is easily coloured by how convincing a manager sounds.
What was The Superinvestors of Graham-and-Doddsville?
It was a 1984 essay by Warren Buffett arguing that the records of several investors trained in Benjamin Graham's approach were too consistent to be luck. Schloss was one of the investors named.
Can individuals still invest the way Schloss did?
The method is simple enough to follow, but the very cheap companies it relies on are far less common in developed markets today, and tangible book value describes fewer modern businesses well.
How did Schloss differ from Warren Buffett?
Both learned from Benjamin Graham, but Buffett moved toward paying fair prices for high-quality businesses and studying them closely. Schloss stayed with Graham's original method, buying statistically cheap shares from the published figures and holding many of them at once.
Related quotes
Other people in the library writing on the same themes.
“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Warren Buffett“The intelligent investor is a realist who sells to optimists and buys from pessimists.”
Benjamin Graham“The single most crucial factor in investing is having a strategy and the discipline to stick with it.”
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