Source: Kigaku Club

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Everard is a long-standing Wall Street investment tycoon. From 1979-2004, the Sogan International Fund (later renamed First Eagle Global Fund) (First Eagle), managed by Everard, had an average annual yield of 15.8%, 13.7% higher than the S&P 500 index. In 2003, Avellard was awarded the Lifetime Honorary Achievement Award by Morningstar.

Successful investments don't require superior intelligence, extraordinary vision, or insider information; all it takes is rational thinking, a perfect knowledge structure, and the ability to avoid group emotional contagion.

Jean-Marie Eveillard (Jean-Marie Eveillard), an investment analyst who worked for Société Générale in 1968, was often at a loss about his work, and his investment strategies all followed [instructions]. He was sent to New York that year, and then he began to change his stock selection strategy. That summer, he and two French students at Columbia Business School heard about Benjamin Graham while cycling in Central Park. After struggling, Everard finished reading “Securities Analysis” and “The Smart Investor” in one go. Graham's investment thought was a beacon in the dark, lighting up Evelard in an instant. “Graham's masterpiece blew my head off. All of the great days of the previous 15 years were wasted.” he said.

The real shift in practice occurred when Evellard was 39 years old. That year he was appointed manager of the Sogan International Fund at the headquarters. This is a very small, little-known mutual fund. When Everard took office in 1979, the fund was only $15 million. The fund company is headquartered in Manhattan, where he has worked alone for many years, enjoying the freedom not to be interfered with by the French parent company.

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Because the future is uncertain, investments should minimise risk.

The secret to successful investing: margin of safety. In other words, when buying stocks and bonds, a margin of safety can be obtained on the basis of “favorable” discounts on “valuation”; in other words, the gap between price and value will provide investors with a buffer to mitigate the effects of “misjudgments,” “poor luck,” and “unknown future conditions.”

It is not based on optimism, but on rational data calculation.

...

Graham's philosophical ideas profoundly influenced Everard. He followed Graham's example in searching the market for stocks that cost at least 30% to 40% less than their valuation.

His strategy worked, and he earned a good reputation for low risk and high reward. Then he managed more and more money.

By 1997, the Sogan International Fund had not experienced huge losses for 18 consecutive years, and the yield had always outperformed the market. The assets managed by Everard had also soared from $15 million to $6 billion. This made him feel more responsible, because these funds were saved by hundreds of thousands of investors for retirement or the education of their children. “They can't afford to lose.” To ensure the safety of investors' investments, Everard is extremely concerned about valuations.

Despite this, Evellard had his own troubled times.

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In 1997, the market was experiencing an Internet boom. From January 1997 to March 2000, the Nasdaq index, which is mainly technology stocks, rose 290%, driven by the Internet and telecom stock boom.

Given the absurd valuation and the difficulty of predicting the company's continued growth, he decided to reject any shares of Technet. For fund managers, it really takes courage to completely deviate from market indices, because if they make mistakes in judgment, their careers will be cut short.

Everard's adhering to margin of safety strategy and “stubborn” personality left him behind the market for 3 consecutive years. In 1998, the Nasdaq Index rose 39.6%, the Morgan Stanley Capital International Index rose 24.3%, and the Sogan International Fund lost 0.3%. In 1999, Sogan International Fund surged, with a yield of 19.6%. Very good performance, right? Wrong, the Nasdaq index rose 85.6% that year. In an age where any newbie could win the jackpot by picking a code, Everard's yield seemed very poor, so investors were quite hesitant. After a year, investors were not happy; after two years, they became very angry; after three years, investors left angrily. In less than 3 years, Sogan International Fund lost 70% of its investors, and its assets under management were reduced from more than $6 billion to $2 billion.

Why can't you see opportunities in popular internet tech stocks? You must own tech, media, and telecom stocks! Your investment style is out of date, and you're no longer suited to a rapidly changing industry!... We can imagine investors' angry, trembling fingers almost reaching Everard's nose.

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One executive complained that he was “a bit old,” and another executive had “calculated the exact date the funds will be redeemed. The time is not far off, and we will have no assets to manage at that time”... Everard felt like he was in a situation where he was torn on all sides.

In the past, he was at most a few months behind the market, but this time it was 3 years. He confesses, “I've been behind for so long that sometimes I think I'm an idiot; in fact, I'm starting to doubt myself... Everyone seems to see the light, but why can't I see it?”

Despite this, Everard persevered, refusing to change his strategy and refusing to retire.

In the end, the old owner, Société Générale, went to a small investment bank and sold him and the fund to a small investment bank. Like an eliminated player, Everard was sold to another team.

No, it's very popular. “Moments of extreme pain” are often followed by “new beginnings” and “extremely favorable opportunities.”

The rollover and interesting twist came after this “transfer” deal.

The transaction information was announced in October 1999, and the transaction was completed in January 2000. Two months later, on March 10, the technology stock bubble burst, and investors who initially chased Technology Network stocks hit the streets one after another. The US NASDAQ index fell all the way from an all-time high of 5048 points in 2000 to 1,114 points in 2002.

52% of the Internet companies that are popular in the market went bankrupt during this crisis. The market capitalization of most Internet companies fell by 75%, and telecommunications companies and hardware companies with heavy financial positions, including Cisco and Sun Micro Systems, fell to almost 90% of their market capitalization.

Netscape, the originator of the freeware model, also lost most of its market share in the confrontation with Microsoft, and more than 400,000 IT workers lost their jobs and were forced to switch careers. At the end of the millennial feast, which made investors' blood boil, there was only one feather left.

After being [transferred], Everard's portfolio quickly “came back to life” and performed well. His rational value was finally recognized by the market. His fund outperformed NASDAQ by 49 percentage points in 2000, 31 percentage points in 2001, and 42 percentage points in 2002.

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In 2003, Morningstar presented him with the first Lifetime Achievement Award in recognition of his “outstanding long-term performance”, maintenance of investors' best interests, and “courage to deviate from consensus.”

The market is very fickle. A moment ago, Everard was still viewed as a fool and a stubborn rock. In a blink of an eye, he became a saint and won everyone's respect. A large amount of money poured in, and the assets he managed eventually grew to $100 billion.

Those who are now like the heavens of Japan will fall into the abyss in the future; those who are decayed now will shine again in the future.

Now Evelard's old owner's bowels are full of regrets.

The reason why Everard has been able to become a global investment tycoon for a long time is precisely because he did something or nothing, rejected the lure of popular stocks that seemed promising but had no margin of safety; it was precisely because his adherence to the value investment philosophy, Graham's “margin of safety” investment principle, allowed his portfolio time and time again to avoid fatal risks along the way, thereby avoiding losses. Looking back on his career at Sogan International and First Eagle Capital, he said, “We have been able to achieve such results for decades, mainly because we don't own certain stocks. We didn't own Japanese stocks in the late 80s, we didn't own technology stocks in the late 90s, and we didn't hold any financial stocks between 2000 and 2008.” As Munger said, you can do better than others by making fewer mistakes. Everard avoided 3 disasters in 30 years, which determined his success or failure.

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Looking back on Everard's sad experience today, we should also look at the impact of the following factors on investment success:

1. Firmly believe in price investment principles and control emotions to overcome the effects of stress. Fund managers are at the core of fund operation decisions. Helping investors maintain high-quality assets in the face of danger is part of a fund manager's professional value.

In addition to superior insight, successful investments require perseverance and long-term patience. No matter how stinging the pressure from the outside world is, don't mess up your ground; no matter how exciting the outside world is, don't go one step further than the thunder pool. However, investment managers do not live in a vacuum; external expectations (investors' emotions and capriciousness), unreasonable market strategies, and unscrupulous successors all threaten investment managers' will and patience.

In the context of serious market failure, in addition to the pressure of performance, many investment managers also have to face pressure from investors (channels), and pressure from bosses and supervisors. In contrast, the “stubborn” Everard was lucky. His deep understanding of the concept of value investment allowed him to withstand the temptation of tech stock fanaticism. Being 6,000 kilometers away from the company's headquarters avoided direct pressure from his superiors and colleagues. Holding shares in the fund gave him the courage to choose not to retire, and the consistency with the fund's interests also made those who stick to it more confident.

2. Adhere to the correct investment strategy, avoid the spread of crowd effects and emotions, and dare to deviate from market consensus. As others flocked to the Internet tech stock circuit, Evellard didn't follow the bandwagon.

3. Adhering to the margin of safety is a magic weapon for getting through any cycle.

4. The future is full of uncertainty, so avoid using leverage at all times.

Postscript: At the time Everard won the award, it wasn't just his old owner, Société Générale, who had turned around and left to pursue the dream of Science and Technology Network at a high level. Think 1*0.2 =?

A friend close to me once bought a certain value fund and its net worth fell at the bottom of the market. They asked me what to do? After reading the fund manager's historical long-term performance and the fund's heavy stock holdings, my response was: Cool. Take it for a long enough time, and the benefits won't be bad. But frequent exits or bottom sales can be a tragedy.

edit/lambor