Walter Schloss

Walter Jerome Schloss
Walter Jerome Schloss
Born	28 8, 1916
Birthplace	Manhattan, New York City, U.S.
Died	Template:Death date and age New York, New York, U.S.
Nationality	American
Occupation	Investor, fund manager, philanthropist
Known for	Value investing disciple of Benjamin Graham; founding Walter & Edwin Schloss Associates; named a "Superinvestor of Graham-and-Doddsville" by Warren Buffett
Website	[[www.walterschloss.com www.walterschloss.com] Official site]

Walter Jerome Schloss (August 28, 1916 – February 19, 2012) was an American investor, fund manager, and philanthropist who spent more than half a century practicing a disciplined form of value investing rooted in the teachings of Benjamin Graham. Operating from a modest office with no computer terminal and no staff of analysts, Schloss compiled one of the most remarkable long-term track records in the history of professional money management. From 1956 to 1984, his investment partnership achieved an annualized compound return of approximately 21.3 percent, far outpacing the broader market over the same period. Over the full life of his partnership from 1955 to 2002, he generated annualized gains of approximately 15 percent before fees. Warren Buffett singled him out by name in the famous 1984 essay "The Superinvestors of Graham-and-Doddsville" as living proof that Graham's principles could produce sustained market-beating results. He died on February 19, 2012, at the age of 95, from leukemia.

Early Life

Walter Jerome Schloss was born on August 28, 1916, in Manhattan, New York City. He grew up during a period of considerable economic upheaval in the United States. The Great Depression, which began when Schloss was a teenager, shaped his early worldview and later informed his conservative, risk-averse approach to investing. His family experienced financial hardship during this era, and Schloss did not have the opportunity to attend college.

As a young man, Schloss entered the workforce on Wall Street during the 1930s. He found employment as a runner at a brokerage firm, performing basic clerical and delivery tasks that were typical entry-level positions in the financial industry at the time. It was through this early exposure to the world of securities that Schloss developed his interest in investing and markets. Despite lacking a formal university education, Schloss was intellectually curious and self-directed, qualities that would serve him throughout his career.

A pivotal moment in Schloss's early life came when he encountered the work of Benjamin Graham, the Columbia Business School professor and investment theorist who is often called the "father of value investing." Schloss took courses taught by Graham at the New York Institute of Finance, where Graham offered evening classes to working professionals who did not hold university degrees. This was Schloss's introduction to the systematic, analytical approach to stock selection that would define his entire professional life. Graham's seminal text, Security Analysis (first published in 1934), became a foundational influence on Schloss's thinking. Schloss later wrote a reminiscence about Graham and Security Analysis in which he described the profound impact these teachings had on his development as an investor.

Schloss's early career was interrupted by World War II, during which he served in the United States military. After returning from service, he resumed his work in finance, eventually joining the Graham-Newman Corporation, the investment firm run by Benjamin Graham himself.

Career

Graham-Newman Corporation

After the war, Schloss joined the Graham-Newman Corporation, where he worked directly under Benjamin Graham. This experience was formative. At Graham-Newman, Schloss was able to observe firsthand how Graham applied the principles outlined in Security Analysis and The Intelligent Investor to real-world portfolio management. Graham's approach emphasized buying securities that traded at significant discounts to their intrinsic value, particularly those selling below their net current asset value (so-called "net-nets"), and maintaining a margin of safety to protect against permanent loss of capital.

Working alongside Graham gave Schloss a practical education that complemented the theoretical framework he had absorbed in Graham's evening courses. The discipline of analyzing balance sheets, assessing tangible book value, and buying stocks that were out of favor with the broader market became second nature. Schloss would later describe this period as essential to his formation as an investor. His time at Graham-Newman also placed him in proximity to other future luminaries of the investment world; Warren Buffett worked at Graham-Newman during an overlapping period, and the two developed a lasting professional relationship and friendship.

Walter J. Schloss Associates and Walter & Edwin Schloss Associates

In 1955, after Benjamin Graham decided to wind down the Graham-Newman Corporation, Schloss struck out on his own and established an investment partnership. He began managing money for a small group of investors, operating initially from a single room in the offices of Tweedy, Browne — another firm with deep roots in the Graham value investing tradition.

Schloss's operation was notable for its extreme simplicity. He worked without a computer, without a staff of research analysts, and without the elaborate technology and data feeds that became standard on Wall Street in subsequent decades. His primary research tools were the Value Line Investment Survey, Standard & Poor's stock guides, and company annual reports and financial statements. He spent his days poring over these publications, looking for companies whose shares traded at discounts to their book value or net asset value. He did not visit companies, attend investor conferences, or meet with corporate management. He preferred to let the numbers speak for themselves, reasoning that management could be persuasive and potentially misleading, while balance sheet figures were more objective.

His son, Edwin Schloss, later joined the partnership, and the firm became known as Walter & Edwin Schloss Associates. Together, they continued to apply the same Graham-inspired methodology that Walter had used from the beginning. The firm managed money for its partners for nearly five decades, finally closing in 2003.

Investment Philosophy and Methodology

Schloss's investment philosophy was a direct application of Benjamin Graham's teachings, adhered to with a consistency that few other practitioners matched over such a long period. His approach can be summarized by several core principles.

First, Schloss focused on buying stocks that traded below their book value, and ideally below their net current asset value. He was a quantitative, balance-sheet-oriented investor. He looked for companies with low debt, tangible assets, and share prices that reflected pessimism or neglect by the market. He was not interested in growth stocks, hot sectors, or companies with exciting stories. He wanted companies that were cheap relative to what they owned.

Second, Schloss practiced broad diversification. Unlike concentrated investors such as Buffett, who preferred to hold large positions in a small number of companies they understood deeply, Schloss typically held positions in 100 or more stocks at any given time. He reasoned that diversification provided protection against the inevitable mistakes that any investor would make. If a single position declined significantly or went to zero, the impact on the overall portfolio would be contained.

Third, Schloss was patient. He was willing to hold positions for years, waiting for the market to recognize the underlying value of a company. He did not trade frequently and did not attempt to time the market. He understood that value investing often required enduring periods when holdings appeared stagnant or out of favor, and he had the temperament to wait.

Fourth, Schloss emphasized capital preservation. Influenced by Graham's concept of the "margin of safety," Schloss tried to buy stocks at prices where the downside risk was limited. He preferred companies with low debt, since heavily leveraged firms faced greater risk of financial distress. He described his approach as consistent with a medical analogy — similar to the Hippocratic principle of "first, do no harm" — focusing on avoiding large losses rather than chasing outsized gains.

Fifth, Schloss kept his costs low. He operated with minimal overhead, had no large team, and charged his partners only a percentage of profits rather than a fixed management fee. This structure aligned his interests with those of his investors and contributed to the strong net-of-fee returns his partnership delivered over the decades.

Investment Record

The performance of Schloss's partnership stands as one of the most compelling long-term records in the history of professional money management. From its inception in 1955 through its closure in 2002, the partnership generated annualized returns of approximately 15 percent before fees, compared with approximately 10 percent for the S&P 500 over the same period. During the period from 1956 to 1984 — the timeframe highlighted in Buffett's "Superinvestors of Graham-and-Doddsville" essay — Schloss achieved an annualized compound growth rate of approximately 21.3 percent.

What made this performance particularly notable was that it was achieved without leverage, without concentration in a small number of positions, and without any of the informational or technological advantages that other successful investors employed. Schloss was essentially a one-person operation (later joined by his son) who relied on publicly available financial data and a consistent, disciplined methodology. His record demonstrated that the Graham approach to value investing, rigorously applied over long periods, could produce substantial wealth for investors even in an era when markets were becoming more efficient and institutionalized.

Over the life of the partnership, a dollar invested with Schloss in 1955 grew to a significantly larger sum than a dollar invested in the S&P 500 index. The compounding effect of his above-average returns, sustained over nearly half a century, resulted in enormous wealth creation for his original partners.

Personal Life

Schloss was known for his modest, unassuming personal style. Despite decades of successful investing and the substantial wealth his partnership generated, he maintained a frugal lifestyle and was not given to ostentatious displays. He continued to work well into his later years and remained engaged with the investing community. He participated in video conferences discussing his approach and the legacy of Benjamin Graham even in his advanced age.

Schloss was also involved in philanthropic activities. He supported the Lower East Side Tenement Museum, a cultural institution in New York City dedicated to preserving the history of immigration in the United States. He was also associated with Freedom House, the nonprofit organization that conducts research and advocacy on democracy, political freedom, and human rights around the world.

His son, Edwin Schloss, worked alongside him at their investment partnership for many years. Walter Schloss died on February 19, 2012, in New York City, of leukemia, at the age of 95.

Recognition

Schloss's most prominent recognition came in 1984, when Warren Buffett included him as one of the featured investors in his essay "The Superinvestors of Graham-and-Doddsville." The essay, originally delivered as a speech at Columbia Business School to mark the 50th anniversary of the publication of Security Analysis, was a response to the efficient-market hypothesis, which held that no investor could consistently outperform the market. Buffett identified a group of investors — all of whom had intellectual roots in the Graham-and-Dodd tradition — whose long-term records defied this theory. Schloss was the first investor Buffett discussed in the essay, and Buffett described him approvingly, noting that he had never attended college but had taken Graham's courses at the New York Institute of Finance and had worked at Graham-Newman.

Buffett later continued to praise Schloss publicly. Upon Schloss's death in 2012, Buffett noted that Schloss had an extraordinary record and that his approach demonstrated the validity of buying stocks at a discount to their underlying value.

Schloss held the Chartered Financial Analyst (CFA) designation, a professional credential in the investment management field. His partnership's archives were preserved at the Heilbrunn Center for Graham & Dodd Investing at Columbia Business School, ensuring that his methods and track record would remain available for study by future generations of investors.

Forbes magazine profiled Schloss in a 2008 article that examined his investment methods and long-term performance, bringing his approach to the attention of a broader audience of investors and financial professionals.

Legacy

Walter Schloss occupies a distinctive place in the history of American investing. His career demonstrated that the principles articulated by Benjamin Graham in the 1930s and 1940s could be applied successfully across decades of changing market conditions — through bull markets and bear markets, periods of inflation and deflation, technological revolutions and financial crises. While many investors adapted or abandoned Graham's original framework over time, Schloss remained steadfast in his commitment to buying statistically cheap stocks based on balance sheet analysis.

His example has been cited by proponents of value investing as evidence that the approach works not because of rare genius or special access to information, but because of discipline, patience, and adherence to sound principles. Schloss did not possess insider knowledge, did not use sophisticated quantitative models, and did not have privileged relationships with corporate executives. He used the same publicly available data that any investor could obtain. The distinguishing factor was his willingness to act on his analysis with consistency over time, and his temperament — the ability to remain calm and patient when the market disagreed with his assessments.

The simplicity of Schloss's approach has made him a source of inspiration for individual investors who lack the resources of large institutional firms. His career showed that it was possible to achieve exceptional results without a large team, expensive technology, or an Ivy League education. For small investors seeking to compete with the professional investment industry, Schloss's record and methods serve as a model.

Schloss also contributed to the intellectual tradition of value investing through his writing and speaking. His reminiscence about Benjamin Graham and Security Analysis preserved firsthand observations about the development of value investing theory. His archived papers at Columbia Business School continue to be studied by researchers and practitioners.

Warren Buffett's decision to feature Schloss first among the "Superinvestors of Graham-and-Doddsville" ensured that Schloss's name would be permanently associated with the demonstration that disciplined value investing could produce sustained, market-beating returns. The essay remains one of the most frequently cited documents in the value investing literature, and Schloss's performance data within it continues to be studied and discussed by investors and academics.