ED WACHENHEIM is chairman and chief portfolio manager of Greenhaven Associates and one of Wall Street's preeminent investors. Greenhaven currently manages about $5.5 billion in funds and has a client list that includes the Wachenheim family, university and college endowments, retired Wall Street executives, and wealthy families.
1 My Approach to Investing 1
2 The Brief Story of My Life 17
3 IBM 31
Successful investing is about predicting the future more accurately than the majority of other investors; we predict a change in IBM’s cost structure.
4 Interstate Bakeries 49
Successful investing often is heavily dependent on the capabilities and incentives of corporate leadership.
5 U.S. Home Corporation 63
Investors can become frustrated when their swans are priced as if they are ugly ducks.
6 Centex 67
Large profits can be earned by successfully predicting a major positive change in the fundamentals of a company or an industry.
7 Union Pacific 79
Investors often do not adequately differentiate between short-term discrete problems and long-term systemic weaknesses.
8 American International Group 91
I went to bed with Miss America and woke up with a witch; this can happen to even the most careful of investors.
9 Lowe’s 101
Using common-sense logic, we conclude there is a high probability that the U.S. housing market will improve markedly in the near future; investing is logical and probabilistic.
10 Whirlpool 113
We conclude that the company’s earnings and share price are being depressed by cyclically low demand for appliances and by
abnormally high costs for raw materials; successful investors should purchase their straw hats in winter.
11 Boeing 133
Opportunities can occur when great companies develop temporary problems.
12 Southwest Airlines 153
When tight markets lead to sharply higher prices for goods or services, earnings and share prices can become buoyant, even for normally unattractive businesses
13 Goldman Sachs 165
Large profits can be earned when perceptions temporarily differ from realities.
14 A Letter to Jack Elgart 181
A letter that summarizes my approach to investing and that includes a number of do’s and don’ts that I found useful in my career.
About the Author 193