Walter Schloss

Walter Jerome Schloss
Walter Jerome Schloss
Born	28 8, 1916
Birthplace	Manhattan, New York City, United States
Died	Template:Death date and age New York, New York, United States
Nationality	American
Occupation	Investor, fund manager, philanthropist
Known for	Value investing, founding Walter & Edwin Schloss Associates, "Superinvestor of Graham-and-Doddsville"
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 built one of the most consistent long-term track records in the history of investment management. Over a career spanning nearly five decades, Schloss applied the principles of value investing that he learned directly from Benjamin Graham, generating annualized returns that substantially outperformed the broader stock market. Operating from a modest office without the trappings of large Wall Street firms—at times working with little more than a desk, a filing cabinet, and copies of Value Line and corporate annual reports—Schloss demonstrated that disciplined, patient application of fundamental security analysis could produce extraordinary results. Warren Buffett featured Schloss prominently in his famous 1984 essay "The Superinvestors of Graham-and-Doddsville," citing him as compelling evidence that value investing was not merely a product of chance but a repeatable, learnable discipline. Schloss died on February 19, 2012, at the age of 95, from leukemia, leaving behind a legacy that continues to inform and inspire practitioners of value investing around the world.

Early Life

Walter Jerome Schloss was born on August 28, 1916, in Manhattan, New York City. He grew up during a period of significant economic turbulence in the United States; the prosperity of the 1920s gave way to the devastating Great Depression, which shaped his worldview and his approach to financial risk for the remainder of his life. Schloss did not attend college, a fact that distinguished him from many of his peers in the investment profession and that he later reflected upon with characteristic modesty.

The economic hardship of the Depression era had a direct impact on Schloss's family and his early career prospects. Without a university degree, Schloss entered the workforce at a young age, eventually finding employment on Wall Street. It was in this environment, seeking to understand the mechanics of investing and the valuation of securities, that Schloss first encountered the teachings of Benjamin Graham, an encounter that would define the trajectory of his professional life.

Schloss's early exposure to Wall Street came through a position at a brokerage firm, where he worked as a runner and later in other capacities. During this period, he began attending courses taught by Benjamin Graham at the New York Institute of Finance. Graham's systematic, analytical approach to evaluating securities—emphasizing the importance of buying stocks at prices below their intrinsic value—resonated deeply with the young Schloss, who had witnessed firsthand the devastating consequences of speculative excess during the market crash and subsequent Depression.

Education

Although Schloss did not obtain a formal college degree, his education in investment analysis came through a combination of practical experience and direct study under Benjamin Graham. Schloss attended courses taught by Graham, where he absorbed the principles that would later be codified in Graham and David Dodd's seminal text, Security Analysis. This education proved formative; Schloss later wrote a reminiscence about Graham and Security Analysis in which he reflected on the profound influence these teachings had on his investment philosophy and career.

Schloss held the Chartered Financial Analyst (CFA) designation, a professional credential that demonstrated his commitment to rigorous investment analysis despite his lack of a traditional university education. The Columbia Business School later recognized Schloss's contributions to the field of value investing by maintaining archives of his work and writings as part of its Heilbrunn Center for Graham & Dodd Investing.

Career

Work with Benjamin Graham

After completing his coursework with Graham, Schloss secured a position working directly for the legendary investor at the Graham-Newman Partnership, one of the earliest and most successful value-oriented investment funds. This experience provided Schloss with an invaluable apprenticeship, allowing him to observe and apply Graham's methods of security analysis in real-time market conditions. At Graham-Newman, Schloss worked alongside other future luminaries of the investment world, including Warren Buffett, who would later become one of the most celebrated investors in history.

Working under Graham gave Schloss direct exposure to the master's approach: identifying securities trading below their net asset value, with particular emphasis on companies whose stock prices had fallen to levels below the liquidation value of their assets. Graham's concept of the "margin of safety"—the practice of purchasing securities at a significant discount to their estimated intrinsic value to protect against errors in analysis or unforeseen adverse events—became a cornerstone of Schloss's own investment method.

Schloss's service with Graham-Newman was interrupted by World War II, during which he served in the United States Army. After the war, he returned to working with Graham and continued to refine his understanding of value investing principles before eventually striking out on his own.

Founding Walter & Edwin Schloss Associates

In 1955, when Benjamin Graham decided to close his partnership and retire, Schloss established his own investment partnership. He began managing money for a small group of investors, operating with minimal overhead and a concentrated focus on buying undervalued securities. The firm later became known as Walter & Edwin Schloss Associates when his son, Edwin Schloss, joined him in the business.

The operational simplicity of the Schloss partnership was one of its most distinctive characteristics. Schloss worked from a small office, initially within the offices of Tweedy, Browne Company, another prominent value investing firm. He did not employ a team of analysts, did not use a computer for stock screening for much of his career, and did not meet with company management. Instead, he relied primarily on publicly available financial data—annual reports, balance sheets, and publications such as Value Line—to identify stocks trading at prices below their book value or net asset value.

This approach stood in marked contrast to the increasingly complex and technology-driven methods employed by most institutional investors. While Wall Street firms spent millions on research departments, proprietary trading systems, and elaborate financial models, Schloss demonstrated that careful study of publicly available information, combined with patience and discipline, could yield superior results.

Investment Philosophy and Approach

Schloss's investment philosophy was rooted firmly in the Graham-and-Dodd tradition of value investing. His approach centered on several key principles:

Buying below book value: Schloss sought out companies whose stock prices had declined to levels below their per-share book value. He focused on the balance sheet rather than earnings projections, believing that asset values provided a more reliable foundation for investment decisions than forecasts of future profitability.

Diversification: Unlike concentrated investors such as Buffett, Schloss typically held a large number of positions—sometimes 100 or more stocks at a time. This broad diversification helped protect the portfolio against the risk of any single investment performing poorly.

Patience: Schloss was willing to hold positions for extended periods, waiting for the market to recognize the underlying value of the companies he owned. He did not attempt to time the market or trade frequently.

Avoidance of leverage: Schloss did not use borrowed money to amplify returns, reflecting the conservative risk management principles he had learned from Graham.

Independence from Wall Street consensus: Schloss did not follow market trends, attend analyst conferences, or rely on tips from brokers. He conducted his own research and made his own decisions, often buying stocks that were deeply unpopular or neglected by the broader investment community.

Schloss himself articulated his approach in writings and occasional public appearances. He described what he called a "Hippocratic method" in security analysis—the idea that, above all, one should seek to avoid losses, much as physicians are guided by the principle of "first, do no harm." This emphasis on capital preservation, rather than aggressive pursuit of gains, was a hallmark of his investment style and contributed to the consistency of his long-term returns.

Investment Record

The performance of the Schloss partnership over its multi-decade history was remarkable by any standard. From the founding of his partnership in 1955 until 2002, when Schloss wound down active management, his fund generated returns that significantly exceeded the performance of the S&P 500 index over the same period.

According to data cited by Warren Buffett and others, from 1956 to 1984, Schloss achieved a compound annual growth rate (CAGR) of approximately 21.3% for his limited partners, compared with approximately 8.4% for the S&P 500 over the same period. This record of outperformance was achieved over a span that included multiple recessions, market crashes, and periods of significant economic disruption, underscoring the resilience of Schloss's approach.

Over the full life of the partnership, Schloss generated annualized returns of approximately 15% after fees, a figure that compounded to produce extraordinary long-term wealth creation for his investors. A dollar invested with Schloss at the inception of his partnership would have grown to a sum many times greater than the same dollar invested in the S&P 500 index.

Schloss's fee structure was also notable for its alignment with the interests of his investors. Rather than charging a fixed management fee on assets under management, as is standard in the modern hedge fund industry, Schloss charged a percentage of profits only, ensuring that he was compensated primarily when his investors made money.

Later Career and Retirement

Schloss continued managing the partnership, eventually with his son Edwin, well into his later years. The firm operated for approximately 47 years before Schloss decided to close the fund around 2003, when he was in his late eighties. Even after formally retiring from active fund management, Schloss continued to follow the markets and discuss investment ideas. He participated in a videoconference organized for value investing students and practitioners, sharing his insights and experiences from nearly half a century of professional investing.

In a 2008 profile in Forbes, Schloss was described as continuing to maintain his simple, disciplined approach to life and investing even in retirement, embodying the same frugality and intellectual independence that had characterized his professional career.

Personal Life

Walter Schloss maintained a private personal life throughout his career. He worked alongside his son, Edwin Schloss, at their investment partnership for many years, and the firm's name—Walter & Edwin Schloss Associates—reflected this family collaboration.

Schloss was also active in philanthropic endeavors. He served as a board member of Freedom House, the organization dedicated to promoting democracy and human rights around the world. He also supported the Lower East Side Tenement Museum in New York City, reflecting an interest in the history and heritage of immigrant communities in the city where he was born and spent his entire career.

Schloss died on February 19, 2012, in New York City, from leukemia, at the age of 95.

Recognition

Walter Schloss's most prominent recognition came through Warren Buffett's 1984 essay "The Superinvestors of Graham-and-Doddsville," originally delivered as a speech at Columbia Business School to mark the 50th anniversary of the publication of Benjamin Graham and David Dodd's Security Analysis. In this essay, Buffett identified Schloss as the first of several investors whose long-term track records provided evidence that the value investing approach could consistently outperform the market, challenging the efficient-market hypothesis.

Buffett described Schloss's track record in detail, noting his investment performance over nearly three decades and emphasizing that Schloss had achieved his results using a simple, disciplined approach that did not rely on insider information, complex models, or special access to management. Buffett pointed out that Schloss had worked virtually alone, without a large research staff, and had nonetheless produced returns that placed him among the top money managers in the country.

The Columbia Business School's Heilbrunn Center for Graham & Dodd Investing maintained archives of Schloss's writings, letters, and investment commentary, recognizing his importance to the history and practice of value investing.

Forbes profiled Schloss in 2008, examining his investment approach and its continued relevance in a rapidly changing financial landscape. Upon his death in 2012, Bloomberg News published an extensive obituary highlighting his contributions to the field of investing and his relationship with both Benjamin Graham and Warren Buffett.

Legacy

Walter Schloss's legacy rests on several pillars. First, his investment record—spanning nearly half a century and encompassing periods of war, recession, inflation, and financial crisis—stands as one of the most enduring demonstrations of the effectiveness of value investing. His consistent outperformance of the S&P 500 over such a long period provided empirical support for the principles articulated by Benjamin Graham and David Dodd, and served as a counterargument to proponents of the efficient-market hypothesis who contended that sustained outperformance was impossible.

Second, Schloss embodied a model of investing that was accessible to individual investors without access to expensive technology, proprietary research, or institutional infrastructure. His reliance on publicly available financial data and his preference for simplicity over complexity demonstrated that sound investment results did not require the resources of a large firm. This aspect of his legacy has continued to inspire small investors and practitioners who seek to apply disciplined, fundamental analysis without the overhead associated with institutional investing.

Third, Schloss's personal character—his modesty, his frugality, his emphasis on integrity and honesty in dealing with his partners—set a standard for professional conduct in the investment management industry. Unlike many fund managers who sought publicity and self-promotion, Schloss preferred to let his results speak for themselves, rarely giving interviews and maintaining a low public profile throughout his career.

His approach to investing has continued to be studied and discussed in investment circles long after his retirement and death. Publications and financial educators regularly cite Schloss's methods and track record as evidence of the enduring viability of deep value investing. The archives maintained by Columbia Business School ensure that his writings and investment commentary remain accessible to future generations of students and practitioners.

Warren Buffett, in his eulogy of Schloss's career, summarized the essence of what made Schloss remarkable: he had taken a simple set of principles, applied them with unwavering discipline over an extraordinarily long period, and in so doing had produced results that rivaled or exceeded those of far more celebrated and better-resourced investors.