This article is posted here (Gurufocus.com).
Here is an excerpt:
Just before the housing crisis Schloss flipped through Value Line and stopped finding a furniture company battered by a lousy housing market: Bassett Furniture. The chair and table maker was trading at a 40% discount to book and had a 7% dividend yield. Schloss said something about how book value hasn’t risen for years and how the dividend may be under threat. His recommendation was to consider buying when and if the company cuts its dividend. Then it would be even cheaper and it eventually most probably will recover (sounds like it would have been wise to wait for General electric to cut its dividend before buying it not too long ago)! The company indeed cut it’s dividend after that from 20 cents to 10 cents and then to 0 by the end of 2008. By the beginning of 2009 the stock was trading under 1 dollar. His call was right: It now recovered to 8 dollars.
|Walter Schloss never changed his investing philosophy, he refined it, he looked forward to buy decent companies with temporary problems, small or no dent and selling under book value. After 17 recessions I guess he acquired a good intuition. And he does really pick up unknown, small cap companies as Buffett said. He simply does not want to lose money on an investment and spoke of Benjamin Graham’s essential ability to remove emotions completely from investing. Mr. Market is emotional. But Mr. Graham did not care, he purchased securities strictly on a quantitative basis. He remained close to fully invested throughout his career. It looks like he trusted more the power of companies to preserve value than holding cash, gold, or meager bank deposits who tend to lose due to inflation. He once said, “I think I sleep better owning stocks than owning cash!”. Companies were his favorite currency.|