Tweedy, Browne Team Talks Firm's History, Value Investing, & More

With more than a century of expertise in piloting value strategies in the market, Tweedy, Browne draws on its longstanding heritage to offer a disciplined approach to value investing. Recently, Tweedy, Browne Managing Directors Jay Hill, CFA, and Jason Minard, CFP, sat down with the VettaFi team to discuss the firm’s history, the advantages of value investing, and more.

100+ Years of Investing Heritage

Nicholas Wodeshick: Let’s start by taking a step back and looking at Tweedy, Browne’s history. Your firm has well over 100 years of experience navigating markets with a deep, value-driven approach. How do you go about leveraging over a century of investing history when providing services to potential clients today?

Jason Minard: As you point out, the firm’s roots go way way back to 1920. Everything we’ve ever done here at Tweedy, Browne is entren,ched in value investing — first as a broker. An important part of our history is that we were Ben Graham’s broker. Our offices were literally in the same building as Graham in those days. Because stock certificates were handed off and checks were delivered physically, if you were next to your biggest client you would get some business. That relationship with Graham was important. We got to meet Graham. We got to meet his star employee, which was Warren Buffett. But most importantly, we began to understand how he thought about investing. And so this decades of experience we have here is sort of entrenched in what at Tweedy we call the “Ben Graham big idea,” right? Stocks are interests in businesses. They’re not pieces of paper that trade around. And the ‘Ben Graham big idea’ is that there’s two prices for every share of stock — the publicly available price that we see on the market in any given day, and what Graham referred to as the intrinsic value, the common sense, real world value of the business and buying in with what he called a “margin of safety,” or a big discount from intrinsic value. This framework — this “big idea”—is what lives and eats and breathes inside the firm. And when we enter those securities, we’re entering at a price that represents a big discount from a common-sense intrinsic value. And I think what we’ve learned here over the decades is how important it is to stick to a discipline, through thick or thin, through fads, through crises. The elegance of this “Ben Graham big idea” is that it leads us into securities when they’re trading at big discounts. It also leads us out of them when that stock price reflects a more common sense value.

Jay Hill: Value investing tends to work over time because human nature doesn’t change. The human nature that I’m talking about is that humans tend to overreact to negative news, right? That’s always going to exist, and it’s often our job to determine what’s a clear overreaction versus what’s a real risk that really is a change that could threaten the business. So, a big part of our job is understanding what the risks or threats are to a company and making a judgment on whether we think those risks are temporary in nature, i.e., cyclical, that will pass with time. Or are they more secular in nature or more permanent in time? If we think they’re more cyclical then that’s a good candidate to perhaps buy the stock and just wait. One thing that we’ve always done is we have emphasized balance sheet strength. If a company doesn’t have a strong balance sheet, even if it’s in a cyclical decline, there’s a chance this cycle won’t turn before the company goes bankrupt. So if you know the business will eventually turn, but you’re not at all sure of the timing, you want to make sure you’re in a business with a strong balance