Tom Gayner: Investing Can Make You Look Dumber Than You Really Are

At the Acatis Value Conference in Frankfurt, Tom Gayner spoke about his approach to long-term investing and the principles that shape his portfolio.

“We try to find good companies and give them time to compound over time,” Gayner said, referring to his decades-long position in Novo Nordisk. “My decision was wholly based on insulin, all the weight loss stuff came later.” Despite recent volatility, he remains unfazed: “Right now I suspect market participants are acting emotionally. I tend to be mild about reacting to that.”

He values the tax efficiency of holding: “We now have about 8 billion dollars of deferred gains in our portfolio of publicly listed stocks. It was 2 billion dollars in 2014. Part of that is due to Novo Nordisk.”

On management changes, Gayner noted, “The smaller a company, the more critical the CEO is… the value of the team grows.” He added humorously, “I would give twenty bucks to anyone in the room that could name four CEOs of Exxon after John D. Rockefeller.”

Touching on political risks like Trump’s drug price proposals, he admitted, “The risk is real, but I would have a hard time quantifying it.”

A significant 15% of Gayner’s portfolio is in Berkshire Hathaway. “I think it can [succeed post-Buffett], and for many reasons. One of which is they have laid out the playbook about how you should run Berkshire.” On Greg Abel, Ted Weschler, and Todd Combs, he said, “Greg Abel will have the ultimate say… My team and I together made that capital allocation decision. I think the same dynamic will exist at Berkshire.”

He appreciates differing styles among decision-makers: “I do like to spend time with people, and Mike [Heaton] accuses me of falling in love with people… But I recognize that I have that problem.”

Asked if Berkshire has too much cash, Gayner replied, “Not at all. I would gladly take that.” On reinvestment risk: “I expect them to deploy some of that capital… It is likely that they might start paying a dividend… and that the pace of share repurchases might increase.”

On Brookfield and other private equity firms, he emphasized, “Those companies have demonstrated their ability to adapt to changing circumstances.” He shared a line from Chad Rowe: “Investing is a business where you either look a lot smarter or dumber than you really are at any given point in time.”

And finally, when asked about tech: “We have not put a lot of new money in the set of technology names that we hold probably in four or five years… So far, I’ve not responded by going back to that well and buying.”

You can read the entire interview here:

Tom Gayner: Warren Buffett and Charlie Munger Laid Out the Playbook (The Market)