Learning from great value investors

When it comes to success in value investing, don’t overlook the role of mentors.

That was the message from Roger Lace, MBA ’75, President, Hamblin Watsa Investment Counsel Ltd., when he described his journey into value investing. 

Lace spoke to students in Professor George Athanassakos’ value investing class on January 23 about the value investors who inspired him and the character traits they possessed.

According to Lace, there are six key character traits that make value investors successful:

1)      Courage (not being afraid to take risks);

2)      Faith (believing that value will be recognized over the long term);

3)      Investigative mentality (investigate thoroughly before you invest);

4)      A contrarian streak (ability to go against the grain);

5)      Emotional detachment (not getting involved emotionally in day-to-day price fluctuations);

6)      Patience (the ability to persevere).

He also cited examples of value investors who exhibited those traits.

For instance, Lace said Sir John Templeton, founder of Templeton Mutual Funds, showed a contrarian streak when he advocated buying stock in the Ford Motor Company back in the mid-’80s, at a time when the company was losing money. Templeton said he expected the company’s stock to increase in price dramatically within a few years. He was right. Ford stock went from selling at $7 a share in 1984 to $57 a share in 1987.

“His ability to stand apart from the crowd was truly legendary,” Lace said.

He also learned from Tony Arrell, Chairman of Burgundy Asset Management, the importance of having an investigative mentality. Lace said Arrell made a case for selling Massey Ferguson because his investigation showed the company didn’t have sustainable profits. Within a year, the company was bankrupt and in need of a government bailout.

And since Lace is President of a wholly-owned subsidiary of Fairfax Financial Holdings Limited, one of Canada’s most successful value investing companies, the students took the opportunity to get some mentoring from him.

He discussed his personal philosophy on value investing and offered his most important lesson: always be true to yourself.

“You’ve got to be your own person and not rely on other people’s opinions or media opinions or market opinions,” he said. “You’ve got to work it out yourself and come to your own conclusions.”

Lace’s presentation was part of a value investor speakers’ series organized by Ivey’s Ben Graham Centre for Value Investing.