Value Investors David Winters and Chris Davis Interviewed

By on December 26, 2011

David Winters - Wintergreen FundConsuelo Mack recently interviewed two value investors who follow the tenets of Ben Graham and Warren Buffett. One was David Winters, manager of the Wintergreen Fund, who has been beating his benchmark since starting his fund. Another is Chris Davis, a portfolio manager in the Davis family of funds, who hasn’t been doing so well lately, but has a good long-term track record.

Mack asked the fund managers what market returns investors can expect to receive in the future and when the market will turn around and provide positive returns since the S&P 500 hasn’t been paying off for the past 10 years.

Chris Davis - Davis FundsDavis pointed out it’s not possible to know what the market will do in the next 6 months to 2 years. Davis said investors should focus on the earnings businesses generate. Davis pointed out a portfolio of durable high quality businesses can be assembled which provides approximately an 8% earnings yield and a 3% dividend yield. Investors can expect to obtain returns based on the earnings growth these businesses generate over time.

Winters agreed with the points Davis made and said he believes investors have a negative view of the future resulting in the irony that investors chase momentum up, and flee it going down. Winters added that we’ve had 10 years where stocks have gone nowhere, but the world has gotten better. He thinks the result is that stocks will have pretty good returns going forward, especially compared to other assets.

Mack challenged Winters asking him what was better about the world with Europe falling apart, gridlock in Washington, and China, Brazil, and India growth rates slowing. Winters said a lot has changed, with “a couple billion consumers joining the party and they want everything we have.” He added that access to information has changed dramatically pointing out he remembers having to go to the library, while now he goes online. Winters said if you can find businesses that are capitalizing on, “these tectonic global shifts, people can make a lot of dough.”

Davis stated there is so much uncertainty and fear that it’s already reflected in the prices. He added the most dangerous time to invest is when investors don’t think there is any risk, and “that’s when they get killed.”

Winters and Davis continued the interview with discussions about the dangers of inflation, universal truths of investing, stocks they consider attractive now (both own Google), what investors can do to increase returns over time, and their opinion of Berkshire Hathaway as an investment.

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