A forgotten super investor: Schloss’ 16 tenets of investing

If you’ve read this column over the past year, it won’t come as a surprise that much of what I’ve learned about entrepreneurial investing comes from reading, talking with people, and through trial and error. As you think about dealmaking, there is some sage advice from a gentleman whom Warren Buffett once labeled a super investor — Walter Schloss.
Schloss’ investment philosophy was simple. He once said, “Investing should be fun and challenging, not stressful and worrying.” He published a one-page note back in 1994 that explained some of his tenets. Here are a few worth sharing:

1. Price is the most important factor to use in relation to value.
2. Try to establish the value of the company. Remember that a share of stock represents a part of a business end and is not just a piece of paper.
3. Use book value as a starting point to try and establish the value of the enterprise. Be sure that debt does not equal 100 percent of the equity.
4. Have patience. Stocks don’t go up immediately.
5. Don’t buy on tips or for quick move. Let the professionals do that, if they can. Don’t sell on bad news.
6. Don’t be afraid to be a loner but be sure that you are correct in your judgment. You can’t be 100 percent certain but try to look for weaknesses in your thinking. Buy on a scale and sell on a scale up.
7. Have the courage of your convictions once you have made a decision.
8. Have a philosophy of investment and try to follow it.
9. Don’t be in too much of a hurry to sell.
10. When buying a stock, I find it helpful to buy near the low of the past few years.
11. Try to buy assets at a discount than to buy earnings. Earnings can change dramatically in a short time. Usually assets change slowly.
12. Listen to suggestions from people you respect. This doesn’t mean you have to accept them. Remember it’s your money and generally it is harder to keep money than to make it. Once you lose a lot of money it is hard to make it back.
13. Try not to let your emotions affect your judgment. Fear and greed are probably the worst emotions to have in connection with the purchase and sale of stocks.
14. Remember the word compounding. For example, if you can make 12 percent a year and reinvest the money back, you will double your money in six years, taxes excluded. Remember the rule of 72. Your rate of return into 72 will tell you the number of years to double your money.
15. Prefer stocks over bonds. Bonds will limit your gains and inflation will reduce your purchasing power.
16. Be careful of leverage. It can go against you.

As you can see, there’s no magic bullet or hidden formula to his success — just good old-fashioned common sense.

Umberto Fedeli is president and CEO of The Fedeli Group. He is an investor in numerous ventures. He is on the boards of directors of the Cleveland Clinic Foundation, John Carroll University, the Cleveland Chapter of the Young Presidents’ Organization and The 50 Club. He is also an honorary chair for the 2016 Aspire Conference, which will take place on May 18. Click the banner below to register for the conference, or visit www.regonline.com/aspire2016.