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Walter Schloss, ‘superinvestor’ praised by Warren Buffett

WASHINGTON - Walter Schloss, the money manager who earned accolades from Warren Buffett for the steady returns he achieved by applying lessons learned directly from the father of value investing, Benjamin Graham, died Sunday of leukemia at his home in Manhattan, said his son, Edwin. He was 95.

From 1955 to 2002, by Mr. Schloss’s estimate, his investments returned 16 percent annually on average after fees, compared with 10 percent for the Standard & Poor’s 500 Index. His firm, Walter J. Schloss Associates, became a partnership, Walter & Edwin Schloss Associates, when his son joined him in 1973.

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“He was a true fundamentalist,’’ Edwin Schloss, now retired, said yesterday. “He did his fundamental analysis and was very concerned that he was buying something at a discount. Margin of safety was always essential.’’

Buffett, another Graham disciple, called Mr. Schloss a “superinvestor’’ in a 1984 speech at Columbia Business School. He saluted Mr. Schloss as “one of the good guys of Wall Street’’ in his 2006 letter to shareholders of his Berkshire Hathaway.

“Following a strategy that involved no real risk - defined as permanent loss of capital - Walter produced results over his 47 partnership years that dramatically surpassed those of the S&P 500,’’ wrote Buffett, whose stewardship of Berkshire Hathaway has made him one of the world’s richest men and most emulated investors. “It’s particularly noteworthy that he built this record by investing in about 1,000 securities, mostly of a lackluster type. A few big winners did not account for his success.’’

To Buffett, Mr. Schloss’s record disproved the theory of an efficient market - one that, at any given moment, assigns a reasonably accurate price to a stock. If companies were not routinely overvalued and undervalued, Buffett reasoned, long-term results like Mr. Schloss’s could not be achieved except through inside information.

Mr. Schloss began working on Wall Street in 1935 as a securities-delivery runner at Carl M. Loeb & Co. He said Armand Erpf, the partner in charge of the statistical department, recommended that he read “Security Analysis’’ by Graham and David Dodd, published a year earlier. The book became a classic in the field. The firm then paid for Mr. Schloss to take two courses with Graham sponsored by the New York Stock Exchange Institute.

Mr. Schloss was ‘one of the good guys of Wall Street.’

Warren Buffett, in 2006 letter to shareholders of Berkshire Hathaway
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The Schloss theory of investing, passed from father to son, involved minimal contact with analysts and company management and maximum scrutiny of financial statements, with particular attention to footnotes.

The Schlosses bought shares of the copper company Asarco in 1999 as the stock bottomed out around $13. In November of that year, Grupo Mexico bought Asarco for $2.25 billion in cash and assumed debt, paying almost $30 per share.

Mr. Schloss’s first wife, Louise, died in 2000. Besides his son, Mr. Schloss leaves his wife, the former Ann Pearson, whom he married in 2001; and a daughter, Stephanie.

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