Jean-Marie Eveillard’s strategy for success as an investor is simple, but it’s one that few have followed.
Eveillard, Senior Adviser, First Eagle Investment Management, said he simply stays true to the value investing approach established by Ben Graham and reinforced by Warren Buffett.
Citing that only approximately five per cent of professionally managed money is run on a value investing basis, Eveillard outlined the challenges to the approach for students in Ivey Professor George Athanassakos’ value investing class on March 13.
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1. Running with the herd
It’s easier to move with the herd than to move in a different direction, even if you think the herd is heading into danger. While value investors think long term, most investors buy and sell securities on a short-term basis.
“If you are a value investor, or a long-term investor, you have to accept in advance that you are not trying to keep up with the benchmark. Occasionally you will lag and to lag is to suffer,” he said. “It takes perseverance to be a successful investor over the long term.”
2. Avoiding hard work
Value investing takes hard work. Since most analysis from outside companies, such as Morgan Stanley and Goldman Sachs, takes a shorter time horizon, value investors need to do their own in-house analysis.
Eveillard also offered advice for doing qualitative analysis of businesses, as Buffett recommends, which he said is typically a hardship because people try to learn everything they can about a business. To simplify the process, Eveillard recommends figuring out five or six strengths and weaknesses of the business and ignoring everything else.
“What I love best about Graham and Buffett is the simplicity of their arguments. Consultants on Wall Street tend to complicate things,” he said.
He cited evidence that strict adherence to the value investing method pays off. His own success is a perfect example. When Eveillard began at First Eagle in the late 1970s (then called SoGen International Fund), it had $15 million in assets under management, which has now grown to $85 billion. In 2003, Eveillard received a Lifetime Achievement Award from Morningstar for building one of the most successful long-term records in the investment business.
He admitted there were some tough times, particularly in the late ’90s, when some of the company’s investments lagged and the firm lost seven out of 10 investors, which is proof that the long-term approach is often difficult to accept.
“People ask me how I was able to take the pain in that period from 1997 to 1999. I don’t know why except that I was a genuine value investor and I couldn’t see myself being transformed into something else,” he said. “Value investing works over time and it makes sense.”
Ivey Professor George Athanassakos with Jean-Marie Eveillard
