The Greatest Investors: Ralph Wanger

Ralph Wanger

Born:	Chicago in 1933.
Affiliations:	Harris Associates Acorn Fund Wanger Asset Management
Most Famous For:	Wanger was widely known for his witty and far ranging quarterly letters to shareholders as lead manager for the Acorn Fund, which, between 1970 and 1988 was one of the top-performing small-cap growth funds in the U.S.

Personal Profile
Wanger received his bachelor's and master's. degrees from the Massachusetts Institute of Technology, graduating in 1955. He started out in the insurance business and then began his investing career with Harris Associates in Chicago in 1960. He worked as a securities analyst and portfolio manager until the formation of the Acorn Fund in 1977, at which time he became its portfolio manager and president, a position he held until his retirement in 2003. While the S&P 500 Index climbed 12.1% per year during this period, Acorn racked up an annualized 16.3% return.

Investment Style
Wanger's investing style at Acorn was simple: be a long-term holder of smaller companies with financial strength, entrepreneurial managers and understandable businesses that will benefit from a macroeconomic trend. He's quoted as saying, "If you're looking for a home run [Wanger preferred these to singles] – a great investment for five years or ten years or more – then the only way to beat this enormous fog that covers the future is to identify a long-term trend that will give a particular business some sort of edge."

Wanger employed the idea of investing according to "themes." For example, if he had been around during the California gold rush, he would not have been investing in gold claims, but he would have loved the businesses that sold miners their picks and shovels. The mines played out in a matter of months, but gold diggers kept at it for several years.

It is reported that Wanger was a voracious consumer of investment information. In valuing a company to invest in he looked for the following parameters:

• A growing market for the company's product or service
• Evidence of a company's dominant market share
• Outstanding management
• An understandable business
• Evidence of a company's marketing skills
• A high level of customer service
• Opportunity for a large stake in the company
• A strong balance sheet
• The price must be attractive

Lastly, Wanger said he constantly had to remind himself that you can have a good company but a bad stock.

Publications

• "Zebra In Lion Country" by Ralf Wanger and Everett Mattlin (1999)

Quotes

"An attractive investment area must have favorable characteristics that should last five years or longer."

"Chances are, things have changed enough so that whatever made you a success thirty years ago doesn't work anymore. I think that by concentrating on smaller companies, you improve your chances of catching the next wave."

"If you believe you or anyone else has a system that can predict the future of the stock market, the joke is on you."

"Since the Industrial Revolution began, going downstream – investing in businesses that will benefit from new technology rather than investing in the technology companies themselves – has often been the smarter strategy."

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