Business Quality and Price are Key to Running Very Concentrated Equity Portfolios: An Expert Portfolio Manager Discusses Value Investing with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - April 2, 2013 - The Wall Street Transcript has just published its Investing in Gold and Value for Downside Protection Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Value Investing - Long-Term Investing - High Quality Companies - Global Investing - Investment Strategies - Large Cap Investing - Longer-Term Investing - High Quality Companies - Investing in Gold - Long-Term Value Conservation - Precious Metals

Companies include: Berkshire Hathaway Inc. (BRK-A), Newmont Mining Corp. (NEM), Barrick Gold Corporation (ABX), Kinross Gold Corporation (KGC), Mercury General Corp. (MCY), Pepsico, Inc. (PEP), Johnson & Johnson (JNJ), General Electric Co. (GE), Microsoft Corporation (MSFT), The Coca-Cola Company (KO), Citigroup, Inc. (C), Leucadia National Corp. (LUK), Exxon Mobil Corp. (XOM) and many more.

In the following excerpt from the Investing in Gold and Value for Downside Protection Report, an expert portfolio manager discusses his investment philosophy and his portfolio-construction strategy:

TWST: Tell me a little bit about Semper Augustus Investments Group.

Mr. Bloomstran: We launched Semper Augustus in late 1998, at the height of the tech and Internet boom, and named the company after the most inflated of the tulip bulbs in 1637 Holland. We thought we had a bubble in tech and in some of the nonsensical Internet stuff, and recognized there were dangers out there. We harbored the name for years, having first read about the tulipomania and the Semper Augustus bulb in Charles Mackay's 1841 book, Extraordinary Popular Delusions and the Madness of Crowds - still one of the best books on investing ever written.

We set out to beat the S&P 500 over long periods of time and have been really successful to date; though we will invariably lag during big up moves in the market, the last 12 to 15 months being no exception. We are coming up on 15 years in business, and we have about $185 million under management.

We're presumptively a Ben Graham, Warren Buffett value shop, running very concentrated equity portfolios. Typically, we have no more than 25 names in the portfolio, sometimes as few as 15. Generally, we concentrate at the high end, where our largest holdings, five or six largest holdings, can make up half of our capital. The business quality and the price have to be outstanding for us to commit large amounts of capital, and there are only a handful of companies where we would exceed 5% or 10%.

A longstanding investment in Berkshire Hathaway (BRK-A) totals almost 30% of our capital today. We employ this dual margin of safety and price where we are first and foremost looking for the quality of the business and the moat around the franchise - the durability of the product or service - and then we try to ensure that returns on capital are adequate...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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