Van Den Berg, in fact, thought he would stick with mutual fund sales and investment management, but then the bear market hit in 1968 and he lost all confidence in funds and fund managers.
"I was really devastated because I thought I had finally found a great career," he says. "Then when I saw how badly funds performed, I got upset and wanted to find out why."
Among the problems he found was that mutual funds rarely stuck to their guns in terms of investment style, which was compounded by the fact that fund managers come and go. So too did the money, with cash flows moving into and out of funds depending on the winds of Wall Street.
When he studied the investment philosophies of Graham and Buffett, however, Van Den Berg says he saw beautiful simplicity. Simply put, he says, it amounts to looking at a company as a business, establishing a market value and then investing with a margin of safety.
At Century Management, that margin has translated into a mandatory 50% discount, and the shares are sold off when they hit about 80% of market value. To find such deep discounts, the firm has to dig deep-into a corporate realm that's most often ignored by analysts. In the beginning, Van Den Berg says, this meant scouring the Standard & Poor's stock guide every week, page by page, and picking out the stocks with low P/Es and high dividend yields. Back then, he notes, a typical bargain company would have a P/E of 5, compared with an S&P 500 average of 8.
These days, computers handle much of the screening, but the analysis is the same, he says. So too are the results. Some examples of typical successful trades:
Moore Products, described by Van Den Berg as a "tired old company no one really cared about," was bought by the firm at $19 a share in 1996. Century Management felt the engineering company was worth $50. "We bought it at below liquidating value," he says. "We could have bought it and closed the doors and picked up some money." Four years later the company was bought out for $54 a share.
Apogee Enterprises, a glass company, was bought by the firm in August 2000 at $4 a share. The discount here was unusually high because they felt it was worth up to $20 per share. "This was right at the top of the market and everyone was buying technology," he says. "This was an old-economy company." They sold it in October 2001 for $13.25 per share.
"We probably buy companies cheaper than the average value manager," says Scott Van Den Berg, who is a vice president at the firm.
The firm looks at seven different criteria when setting private market value, including free cash flow, assets and liabilities, a company's place in its industry and the price comparable companies are selling for in the marketplace.