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Tom Russo is the Managing Member of Gardner Russo & Gardner, where he manages $11 billion in a long only, global value strategy. Tom buys the stock of global consumer businesses with great brands and holds them for a really long time. He looks for businesses with a capacity to reinvest free cash flow and a capacity to suffer through short-term pain in order to achieve long-term gain. Tom started his investment career at the Sequoia Fund in New York, where he worked from 1984 to 1988. His first partnership, Semper Vic Partners, has compounded at 14.6% per year for 33 years, besting the S&P 500 by 3.6% per annum.

Tom is a graduate of Dartmouth College (B.A., 1977), and Stanford Business and Law Schools (JD/MBA, 1984). He has served on Dean’s Advisory Council for Stanford Law School, Dartmouth College’s President’s Leadership Council, and the Advisory Board for the Heilbrunn Center for Graham & Dodd Investing at Columbia Business School, as well as on the boards of the Winston Churchill Foundation of the U.S., Facing History and Ourselves, and Storm King Art Center.

Our conversation covers how Tom created an investment strategy by personalizing early lessons from Warren Buffett, the capacity to re-invest, the capacity to suffer, and what it takes to own a stock for decades. Tom’s time horizon and fortitude as an investor parallels those of institutions with permanent capital. Listeners will get a fresh perspective on what it means to be a long-term investor.

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Show Notes

3:20 – How the spark got lit for Tom to become a value investor

3:54 – The Sharpe Ratio

6:26 – Family and personal background

8:03 – Move to consumer brands

12:06 – Key tenants to investing in consumer brands

12:26 – Family controlled

14:04 – Capacity to reinvest

15:17 – Capacity to suffer

19:10 – Portfolio turnover and the investment in Heineken

22:46 – Position sizing when portfolio turnover is so low

25:08 – Opportunity costs and behavioral finance

28:58 – Benefits of insider insights

31:02 – The capacity of Tom’s investors to suffer

34:00 – What is happening today with the investor base and their capacity to suffer

36:07 – The structure of Tom’s strategy vs. a more a diversified portfolio

37:28 – Sitting on investment committees

38:02 – Comparing Tom’s decision-making process to Warren Buffett’s

40:29 – Case study of Wells Fargo

44:21 – Does reputational damage impact the ability to reinvest

47:04 – Tom’s research process and the importance of listening

49:46 – How Tom keeps track of nuggets in everyday conversations

51:00 – Closing questions