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Richard, George (ed.) / Wisconsin alumnus
Volume 59, Number 2 (Oct. 1957)

Brittingham, Thomas E., Jr.
"Bold" investments pay off,   pp. [23]-26

Page 25

victories, no wise investor would put his
money in one of the old-line companies
which has passed its peak and is resting
on its laurels.
  "My own experience has proved con-
clusively that maximum results have
been obtained through growing compa-
nies, keeping them until they have com-
pleted their growth, and discarding them
when public fancy has changed them
into blue chips and pushed them to fan-
tastic heights where they are unattrac-
tive because of their ridiculously high
price ratio to current earnings. A good
horse can't go on winning races forever,
and a good stock eventually passes its
peak, too."
   To practice this philosophy, the in-
vestor must anticipate tomorrow's blue
chip investments. This is what the Foun-
dation has tried to do. The low point
in its income actually was reached dur-
ing the first year. At no time after that
was income less than 8% above that for
the first year. Ten years later, the income
had more than doubled. In the worst
year WARF has had, 1951-1952, its in-
come dropped only 4.51%7....
   Two basic principles have guided the
 operations of the WARF fund. First, it
 is invested almost entirely in common
 stocks at all times; second, the fund is
 fully invested, whether the market is
 high, low, or in between. Investment
 formulas are out. Vaccillation between
 stocks and bonds ignores the precept
 that effective selection from common
 stocks will produce better results than
 trying to outguess the market's fluctua-
 tions. It makes little difference whether
 the market will be higher or lower in
 the next month or two. The probability
 still remains that five years from now,
 the dollar again will have decreased in
 purchasing power, and that stock values
 may be considerably higher, to offset the
   The danger is that investment com-
 mittees-and here is where conservative
 investors probably make their gravest er-
 ror-will leave funds invested in short-
 term bonds or cash while waiting "to
 buy things cheaper." Theoretically, this
 is good. In practice, this is what hap-
 pens: when the market is declining, the
 committee does nothing because the
 members feel it will drop even further.
 Once the market has turned upward, it
is too late because the buying point was
   WARF's investment meetings are de-
voted completely to the discussion of
values in our portfolio, the purchase of
the most attractive stocks, and the selling
,of the most overvalued to pay for these
purchases. Now what is "overvalued
stock?" Briefly, it is stock which per-
haps has become a favorite of the day, is
out of line with dividend return and
price-earning ratios, and is slowing in
   Without question, WARF's policy of
 not trying to outguess the fluctuations of
 the market is responsible for some of its
 success. Compared with the market-
Wisconsin Alumnus, October, 1957
favorite policy of many of the pension
funds managed by some of the largest
banks, WARF's approach has been much
more daring. Singularly enough, how-
ever, it has offered more security and, in
our opinion, it is bound to do so in the
future. Under this policy, companies
which have demonstrated a strong up-
ward trend in earning power over a
number of years, but which have not be-
come favorites of investors generally, at-
tract investments. These companies can
be bought on a more rewarding earning
and dividend basis. Plenty of such com-
panies are still unrecognized, in contrast
to some of today's favorites, with their
extremely high price-earning ratios.
   The Foundation, then, constantly has
 enlarged its percentage of funds in com-
 mon stocks. Does this endanger security?
 Security is a hard word to define. To-
 seek security is to do those things which
 will give the greatest protection against
 changing conditions. Certainly, in the
 Barron's Widow's Contest, there was far
 greater protection in the young growing
 companies than in the approved lists of
 blue chips.
   The experience'of my own family in
 1932 and the period following may be
 worth recounting. At this time, those
 whose investments were in bonds or
 fully in common stocks experienced
 heavy depreciation. There were two
 listed investment companies- Fourth
 National and Lehman Corp.-which
 were about 35%-40% positioned in
 Government bonds. These firms were
 trying to halve the difference, so that at
 the right moment they could switch back
 into a heavier common stock position.
    Meanwhile, the Brittingham efforts
 were devoted 100% to the study of com-
 mon stocks. What happened? During
 1932, the Dow-Jones Industrial Average
 went down 23%; one of the investment
 concerns went down 11 %, the other
 10%. Our family, fully invested in
 highly diversified common stocks, went
 down 8%. In 1933, when the turn
 came, we went up 53%, Lehman 38%,
 and Fourth National 18.6%.
    Some of the younger companies have
  made magnificent gains for WARE. Dis-
  stillers-Seagrams, which was in the
  original Widow's Contest in 1939, and
  Goodrich, which was added in 1944,
  were purchased by WARF at the same

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