Third generation value investor Chris Davis discusses why unpopular financial stocks can actually be compounding machines.
WEALTHTRACK Episode #1247; Originally Broadcast on May 13, 2016
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CHRISTOPHER DAVIS
- Chairman & Portfolio Manager,
- Davis Funds
Bankers, financiers or money lenders, as they have been called derisively at various points in history are currently at one of their reputational low points. Presidential candidates from Bernie Sanders to Hillary Clinton and Donald Trump have all taken their shots. Sanders has introduced the “Too Big to Fail, Too Big to Exist Act” which would break up the big banks.
Dislike of banks and bankers is not a modern phenomenon.
Thomas Jefferson once stated: “I believe that banking institutions are more dangerous to our liberties than standing armies.” You can see why he and Alexander Hamilton, who created the first national bank and was the first Treasury Secretary, had their disagreements!
Even some titans of industry have been critics. Henry Ford, the Founder of the Ford Motor Company was one of them, stating: “It is well enough that people of the nation do not understand our banking and money system, for if they did, I believe there would be a revolution before tomorrow morning.”
Luckily, that revolution never came. For the record, banking and Wall Street provide the essential fuel for economic growth, mainly money and credit. They enable individuals, companies and governments to raise capital, buy goods and services, build, expand and invest. As this week’s guest points out, the vast majority of us are bank customers!
Investing in financial stocks in recent years has been challenging. Over the last decade the S&P 500 Financials Index has delivered negative annualized returns whereas the S&P 500 has not. And although their annualized performance over the last five and three year periods has been close to 10%, the group has continued to underperform the market.
This week’s guest is Christopher Davis, a third generation value investor whose family has a long history of investing in financial stocks and continues to do so today. Davis is Chairman ofDavis Advisors, Portfolio Manager of the Davis large cap portfolios, and Co-Portfolio manager since 1995 of the firm’s flagship Davis New York Venture Fund, which was founded by his Dad in 1969. Chris has also been the Portfolio Manager of the fund’s no-load equivalent, Selected American Shares since its launch in 2004. In 1991 he created the Davis Financial Fund, now celebrating its 25thanniversary.
Rated 4-stars by Morningstar, the fund has far outperformed its benchmark and the market since inception with better than 11% annualized returns. I began the interview by asking Chris why he created a fund focused on financial stocks in the first place.
If you’d like to see the show before it airs, it is available to our PREMIUM subscribers right now. We also have an EXTRA interview with Davis about how his approach differs from his grandfather’s and father’s. It is available exclusively on our website.
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Thanks for watching. Have a great weekend and make the week ahead a profitable and a productive one.
Best Regards,
Consuelo
TAKE ADVANTAGE OF THE POWER OF COMPOUNDING IN STOCKS
“All the commercial push is behind telling you that you ought to think about doing something today that’s different than you did yesterday. You don’t have to do that. You just have to sit back and let American industry do its job for you.”
– Warren Buffett
The Superinvestors of Graham-and-Doddsville
“SUPER INDEX”
Berkshire Hathaway Inc B (BRK.B)
- Price: $143.24 on 5/11/16
- 52-week range: $123.55 – $148.57
Berkshire Hathaway Inc A (BRK.A)
JPMorgan Chase & Co (JPM)
Wells Fargo & Co (WFC)
Alphabet Inc A (GOOGL)
Amazon.com Inc (AMZN)
DAVIS GROWTH MACHINES
Wells Fargo & Co (WFC)
American Express Co (AXP)
Bank of New York Mellon Corp (BK)
JPMorgan Chase & Co (JPM)
BERKSHIRE HATHAWAY / DAVIS FUNDS
SHARED HOLDINGS
American Express Co (AXP)
Bank of New York Mellon Corp (BK)
Costco Wholesale Corp (COST)
Wells Fargo & Co (WFC)
This transcript will be available soon. More information regarding WEALTHTRACK transcripts can be found here
Christopher Davis from the WEALTHTRACK Archives:
GENERATIONAL DIFFERENCE
Some things change. Some stay the same. Third generation investor Chris Davis is carrying on the family tradition in the Davis Funds with a difference.
