November 11, 2008 — What's the best asset to own now? Will today's financial turmoil force hedge funds out of the market, or fundamentally alter the processes by which hedge fund managers make investment decisions? Will Warren Buffett serve as Secretary of the Treasury in the Obama administration?
These were just a few of the questions pondered by a group of 25 investment professionals during two days of presentations and panel discussions at the University of Virginia's inaugural "Value Investing Conference," hosted by the McIntire School of Commerce and the Darden School of Business. The free, public conference was held Thursday and Friday at Charlottesville's Paramount Theater and the Darden School's Abbott Center Auditorium.
"The mission of the Value Investing Conference is to assemble the investing public, professional investors, scholars and students in the field of value investing for the purpose of highlighting and disseminating best practices, honoring best practitioners and revealing new trends and developments in the field," said Darden Dean Robert Bruner, noting that he expects the conference to become an annual event.
"Value investing," an investment paradigm pioneered by Benjamin Graham in the late 1920s — and perfected by Charlie Munger and Buffett over the last half-century — involves buying securities whose shares appear to be underpriced according to the metrics of various methods of fundamental analysis.
The conference was dominated by discussion of the current financial crisis, and opened with a panel discussion of the crisis's implications for investors, value investing and the hedge fund industry.
Commenting on current conditions, the six panelists — Christopher Brightman, chief executive officer of the University of Virginia Investment Management Company, or UVIMCO; Rich Evans, assistant professor of business administration at Darden; 1985 Mcintire alumnus John Griffin, founder and trustee of Blue Ridge Capital; 1979 Darden alumnus John Macfarlane, chief operating officer of Tudor Investment Corporation; 1964 College graduate and 1968 Darden graduate Dick Mayo, chairman of Mayo Capital Partners; and Ken Shubin Stein, founder of Spencer Capital Management — agreed that the scope, magnitude and complexity of today's situation have created an environment of enormous and unprecedented uncertainty.
"We've been running a macroeconomic experiment for the past two decades," Shubin Stein said, "and there are so many variables involved, it's impossible to know what's happening."
But Griffin, who stated that he too has "no idea" what is currently going on, argued that by constructing a fundamentally sound portfolio, guided by consistent, sound principles and thorough, rational analysis, crisis can be averted.
"You build your ark during sunny days for times like this," Griffin said.
Griffin also warned against what he termed "reversion to the mean syndrome" — that is, the tendency to believe — and to bet — on the idea that things will revert to the mean.
"There's nothing in life that says that things have to revert to the mean," Griffin said. "The future is uncertain."
Nevertheless, experts on other panels sought to examine subjects characterized by somewhat more certainty (at least for the moment), including where value can currently be found around the globe; the consistently strong relationship between sound management and successful investment; how to find value in underexplored asset classes; and the cognitive biases that invariably cause investors to make bad decisions.
"Our goal in organizing this conference was not to provide our audience with predictions for the future, but rather to provide them with some insight into to the art of value investing, as practiced by some of today's most successful investors," said conference organizer David C. Smith, associate professor of finance at the McIntire School and director of McIntire's Center for Financial Innovation. "We wanted to demonstrate to our audience that well-allocated capital can act as an engine of prosperity, regardless of economic conditions."
The conference's opening night also featured a presentation by Alice Schroeder, author of "The Snowball: Warren Buffett and the Business of Life," currently Amazon.com's best-selling business book and the only authorized biography of the legendary value investor.
Schroeder detailed for the audience Buffett's near-photographic memory for financial statements and information, remarkable ability to identify the odds of catastrophic risk in any potential investment, extraordinary work ethic and devilishly simple investment philosophy. (Schroeder also commented, in response to an audience member's question, that Buffett would "definitely not" be interested in serving as the new Secretary of the Treasury.)
Conference attendees also heard from Whitney Tilson, winner of the 2008 "Navigator of the Year" Award, given annually to an investment professional who, through his or her gifts of time and capital, has improved society and motivated others to serve. Tilson, the founder and managing partner of T2 Partners LLC, reminded the audience that wealth is uncorrelated with happiness and that real happiness comes from helping others.
"Clearly, the inaugural Value Investing Conference was a tremendous success," said McIntire Dean Carl Zeithaml. "We are extremely pleased to host such an outstanding group of investment professionals to discuss topics of such vital interest, timeliness and importance, and we look forward to hosting the Value Investing Conference next year in McIntire's state-of-the-art new home in Rouss & Robertson Halls."
To see the full agenda of the Value Investing Conference and to read about conference participants, go to www.darden.edu/vic/.