The shift in managers underscores how difficult it has been for value adherents to produce solid returns in a stock market that has rushed to embrace fast-growing technology stocks at the exclusion of almost anything else. Over the past few years, Mr. Sanborn has shunned the New Economy technology stocks, arguing they are too expensive.”2
Lastly, Julian Robertson was a successful portfolio and hedge fund manager. He ran the $6 billion Tiger Fund. In late March of 2000, he threw up his hands, declared that he didn’t understand the stock market anymore and announced he was liquidating his multi-billion dollar portfolio. The New York Times covered the story this way:
““The financial markets humble ordinary investors all the time. In Julian H. Robertson Jr., head of Tiger Management, they have humbled an investing giant.
After 20 years of generating superlative investment returns by buying stocks that were undervalued and selling short those that carried excessive valuations, Mr. Robertson, 67, confirmed yesterday that he was shutting Tiger’s operations. He has essentially decided to stop driving the wrong way down the one-way technology thoroughfare that Wall Street has become.”3
Notice the commonality of the three announcements. Vanderheiden and Sanborn were shown the door and treated like their poor performance in 1998-1999 was due to an obvious decline in their skills as portfolio managers. The “retirement” came from parent company frustrations via investor withdrawals due to the greater excitement and short-term results in tech-oriented portfolios. Robertson fired himself and admitted that he didn’t believe in a finance world void of value investing, thinking that there was no place for him at a table of futuristic speculation. The bottom line and the temporary sin was avoidance of the biggest bubble in the stock market since the ‘Nifty-Fifty’ stocks of 1970-1973.
Was there anything we could learn to enhance our discipline by avoiding what these managers went through? The answer is not only no, but we actually exist and get our long-term success by being lonely and contrarian in our view of the U.S. stock market. After all, our theme song is “Only the Lonely Can Play.”
This brings us to today and the resignation of Robert Goldfarb as the lead portfolio manager at Sequoia. Here is the Financial Times’ version of the announcement:
“The Sequoia Fund, the $5.6bn mutual fund with historic ties to Warren Buffett, said on Wednesday that Bob Goldfarb, its manager for the past 36 years, would retire following huge losses on its investment in Valeant Pharmaceuticals.
“While we have beaten the market over the past decade, through the end of 2015, our investment in Valeant has diminished a record that we have built over two generations and in which we take great pride,” he said.
The Sequoia Fund, the flagship fund at New York fund manager Ruane, Cunniff & Goldfarb, traces its origins back to 1970 and Mr. Buffett’s decision to wind up his first investment partnership; he told his early investors to put their money instead with Bill Ruane, his friend and Sequoia’s first manager.”4