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These turnover figures speak volumes. The difference between taking momentary fliers and selecting long-term buys is the difference,

truly, between speculation and investing. It is a commonplace of academic wisdom that information is costly and difficult to come by, so that

investors, having learned something new and valuable about a company, quickly “arbitrage” – buy or sell – the stock so as to capture the new

value, as if there were some precise figure.51 Those five-year average holding periods, however, tells us that the funds are not looking to capture small differences. Buffett put it succinctly, “You don’t try to buy businesses worth $83 million for $80 million.”52 Writing to investors after the year 1999, Bill Nygren commented that Oakmark Select’s new Washington Mutual investment had in fact dropped in price. But the business results had been excellent, and he was there for the long pull, much as Graham would have advised.53 At calendar year-end 2003, with earnings still growing and the stock up now, too, Washington Mutual had grown to 16% of the portfolio. And that’s just one of our sticky-fingered group of funds.

How costly could the information be? Anyone can discern the holdings on the Internet for free, and their portfolios don’t change that often. Oak Value’s website states flatly that in value investing there are neither difficult formulas nor inside or otherwise non public information. Martin Whitman of Third Avenue Value Fund, too, says that the fund doesn’t have superior information; “the trick” is to use the publicly available information in a superior manner.54 Moreover, the funds’ staffs are not large. For the first ten years of its 20-year existence, FPA Capital was managed solely by Rodriguez, and for the second ten by him and three associates. The two international First Eagle funds – over $14 billion in all – are managed with just seven staff analysts. The information is easy (too easy) to come by. Using the information selectively, discriminating between the telling fact and the mind-numbing flow of daily statistics, is the trick.

Value funds don’t just buy and hold, of course. Legg Mason sold the Nokia shares mentioned above, at almost the precise moment the Fortune 10 list was being recommended for purchase. By then, according to Fortune, Nokia’s price-earnings ratio had reached the stratospheric level of 75. Price-and-value. And margin of safety, which by then had evaporated for Nokia.

Implicit in their longer holding periods is the fact that value funds define risk as business


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