'We do not rely on Wall Street-generated research' - A Look at Former Buffett Stock Picker Lou ...

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"My approach is eclectic. I try to read all company documents carefully. We try to talk to competitors. We try to find people more knowledgeable about the business than we are. We do not rely on Wall Street-generated research. We do our own research."

- Lou Simpson (Trades, Portfolio)


When you think of Warren Buffett (Trades, Portfolio)'s partners and associates, you probably think of men such as Charlie Munger (Trades, Portfolio) or even Bill Gates (Trades, Portfolio), but oftentimes forgotten is Buffett's former stock picker and mastermind, Lou Simpson (Trades, Portfolio). Once referred to as "the next Warren Buffett (Trades, Portfolio)," Simpson, known for his involvement in the insurance giant Geico was a media-shy value investing genius now maintains an even quieter life, managing his portfolio in the quiet of Naples, Fla.

History

Louis A. Simpson, more commonly known as Lou, serves as the Managing Member and Chairman of SQ Advisors in Florida. Simpson earned his BA in Economics from Ohio Wesleyan University in 1958 and received his MA degree in Economics in 1960. From there he went on to work various jobs increasing his status and credibility. Simpson served as the President and Chief Executive Officer at Western Asset Management Company from 1977 to 1979, and from there he moved on to the insurance company Geico. Starting in 1979 Simpson was the Senior Vice President and Chief Investment Officer at Geico and from that point he bounced around in different positions, ultimately making his way to Chief Executive Officer of Capital Operations in 1993.

Before his beginnings at SQ, Simpson was the CEO of Geico's capital operations. In 1996 Warren Buffett (Trades, Portfolio) was finalizing his purchase of Geico when he met Simpson, and he was so impressed with the quality of Simpson's work and record that he kept him on staff as the CIO of Geico. Upon his retirement from Geico in 2010, Simpson was managing over $4 billion worth of stocks.

Lou Simpson (Trades, Portfolio) left his position at Geico in 2010 and established his own investment firm, SQ Advisors, in December 2010. Simpson began his fund with $150 million to $200 million in assets under management which he gathered from friends, family and charities. His most recent quarterly updates highlights a total portfolio value of over $2.1 billion.

The guru serves on a variety of committees and boards including the Executive Advisory Board at Prem Watsa (Trades, Portfolio)'s Fairfax Partners, Magma Power Company, the University of California San Diego Foundation as well as the Woodrow Wilson National Fellowship, amongst many others.

Most recently Simpson has been reported to having given $8 million to his alma mater Ohio Wesleyan for a new fitness center. The guru, and his wife, Kimberly Querrey, announced on Feb. 13 that they would be donating the money to turn the Pfeiffer Natatorium into a 13,000-square-foot fitness center. The center will officially be called the Simpson Querrey Fitness Center.

Performance and Portfolio Data

Being such a quiet man, Simpson's importance amongst the list of GuruFocus is highlighted through his historical performance. In fact upon Simpson's retirement, Buffett admiringly reported that Simpson never sought approval for his buying and selling decisions. Also in his 2004 letter to shareholders Buffett said that Simpson was "a cinch to be inducted into the investment Hall of Fame," even though he sometimes disagreed with Simpson's picks. Buffett went on to say that "Usually he's [Simpson] right." The magician of Omaha also has been previously quoted to saying that if Simpson had been even slightly younger he probably would have been Buffett's predecessor.

From 1980 to 2004, when Simpson was in control of Geico's portfolio, the company suffered annual losses only three times and beat the S&P500 stock index eighteen times. During this time frame Simpson's average annual gain was 20.3% over the S&P's 13.5%.

Simpson's total holding history:

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Lou Simpson (Trades, Portfolio)'s fund, SQ Advisors, is a Naples, Florida-based employee owned investment manager. The firm provides its investment services to high net worth individuals. The fund also caters to individuals, pooled investment vehicles, charities, corporations and other investment advisers. SQ Advisors manages client-focused equity portfolios in which it invests in the public equity markets across the world.

Portfolio and Performance Data

As of the fourth quarter Simpson's SQ Advisors fund boasts a small

1. United Parcel Service (UPS): Simpson holds on to 2,378,662 shares of UPS, representing 11.9% of his total portfolio as well as 0.25% of the company's shares outstanding. The guru increased his position 8.16% over the fourth quarter. Check out more information on Simpson's UPS holding here.

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2. Oracle Corporation (ORCL): Simpson owns 5,887,075 shares of Oracle, representing 10.7% of his total portfolio as well as 0.13% of the company's shares outstanding. The guru upped his stake 11.03% over the fourth quarter. Check out more on Simpson's ORCL holding here.

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3. Wells Fargo (WFC): Simpson holds 4,802,387 shares of Wells Fargo, representing 10.4% of his total holdings as well as 0.09% of the company's shares outstanding. Simpson increased his position 10.58% over the past quarter. Check out more on Simpson's WFC holdings here.

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4. Berkshire Hathaway (BRK.B): Simpson holds on to 1,754,366 shares of Berkshire Hathaway, representing 9.9% of his total portfolio holdings as well as 0.08% of the company's shares outstanding. Simpson upped his position by 7.07% over the past quarter. Check out more information on Simpson's BRK.B holding here.

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5. Valeant Pharmaceuticals International (VRX): Simpson owns 1,658,555 shares of Valeant Pharmaceuticals, representing 9.3% of his total assets managed and 0.50% of the company's shares outstanding. Simpson made a slight reduction of -0.14% to his holdings in VRX over the past quarter. Check out more info on Simpson's VRX holding here.

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Warren Buffett (Trades, Portfolio)'s former stock picker gives the investor a good look into a long and successful history of value investing. While Simpson is not an immensely verbal man, his historical success on his own and through Berkshire Hathaway and Geico show exactly why he should be considered one of the investing greats.

To find out more about Lou Simpson and his historical stock picks, check out his guru page here. Also, try a free 7-day premium membership trial here.

This article first appeared on GuruFocus.

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