As a young man, Eckart Weeck spent summers helping his father sell cars in Princeton, New Jersey. But one fateful day he stumbled upon a Berkshire Hathaway annual report and, after reading it cover to cover, he began devouring everything Warren Buffett had written on investing.
It was an epiphany for the young man who until then had been a disenchanted biology major. When Weeck’s father sold his interest in the dealership, it cemented Weeck’s decision to pursue a newfound passion.
Fast forward some 35 years and like his idol Buffett, Weeck prides himself on finding good investments in the most unlikely of places. Weeck eschews securities-picking programs and artificial intelligence when it comes to making investment decisions.
Instead, he peels back the layers when investigating a potential investment. His “deep dives” routinely consist of number crunching, projection analysis, management assessment and opportunity evaluation, and even then, he’s admittedly had his share of blow-ups.
While acknowledging that his long-term, buy-and-hold strategy is not for everyone, this senior managing director and senior portfolio manager at Highlander Capital Management in Short Hills, New Jersey, has no plans to change as the firm manages about $220 million in client assets.
That said, Weeck isn’t all work, no play. He also takes part in charity functions, such as the annual fundraising event for the Hudson County Detectives Association, which is a local police benevolent group that aids police officers’ families in need.
Q: How did your education and early business experiences shape your investing views?
ECKART WEECK: When I entered the securities business in the early 1980s I had a very good mentor who had been an analyst. He emphasized the importance of paying attention to details and to view this business as buying ownership interests in companies. Once clients accept that, they often see their investments from a more businesslike standpoint.
Has your approach cost you clients?
Over the years a few clients have left us and we’ve turned some away simply because we felt they would not be compatible.
What might Buffett say to that?
Buffett once used a baseball analogy where the investor is the batter and the stocks are pitches. The advantage the batter has is that there are no called strikes. You can wait indefinitely until the “fat pitch” arrives before swinging. The “fat pitch” of course being an investment you’re fairly certain is dramatically undervalued.
Once we have identified what we believe to be an undervalued company, we add it to the portfolio with the obvious expectation that it will increase in value over time. We use much of the same type of analysis when buying bonds except we approach the decision-making process from a creditor standpoint rather than that of an owner. The important message to clients is that they begin to think about their portfolios as representing ownership interests in a variety of companies and industries rather than just a flashing number on a screen.
How did your method perform in 2008?
The S&P 500 index returned -37.00% in 2008 including dividends. Our composite account returned -24.98% for the year. Results for our composite, since inception on 1/1/2000 and through 12/31/2017, was +314% vs. 157.7% for the S&P 500 with dividends. Annually, that works out to 8.21% for the composite and 5.40% for the S&P 500.
How did your clients react to this news?
Investors often confuse volatility with risk. Most understood, a few walked away. Investors with short attention spans generally do not do well in such a climate. These types often feel compelled to act due to short-term circumstances. This is counter to our philosophy. We were actually buying during this period. The atmosphere on Wall Street was like being at a distressed sale.
Do you hedge your portfolios?
We don’t hedge our portfolios. As long as the price of a security remains below our appraisal, we’ll continue to own it or buy more.
Sometimes it simply takes a while for others to come around to your point of view. That can occur through the security being bid up to a level more in line with its intrinsic value or through a buyout.
Can you give some examples?
We had Yum! Brands (formerly Tricon Restaurants) in the early 2000s. I liked that it was converting to franchise ownership. It would be less capital intensive for the corporation. This we anticipated. We did not see the company venturing into China and the success it would have there.
We purchased a company called Airgas when it had a market cap of less than $100 million. Twenty years later it was purchased by Air Liquide for more than $10 billion.
On the flip side we invested in Teva Pharmaceuticals when they purchased Allegan’s generic drug business. It looked like a good acquisition from a debt standpoint. But we did not see the across-the-board drop in generic drug prices coming. We bought it in the low $30s, it dropped to $11 and has hovered in the low $20s. It’s part of the game.