Walter Schloss

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Biography

Walter Schloss (1916–2012) was one of the most successful and longest-tenured value investors in American history. Over nearly five decades of independent investing, he compiled an extraordinary record of returns using nothing more than Benjamin Graham's principles, a stack of Value Line reports, and a desk in a shared office on Madison Avenue.

Born in New York City, Schloss never attended college. He took Benjamin Graham's night course at the New York Institute of Finance in 1935 and went to work for Graham at the Graham-Newman Corporation in 1946. There he met Warren Buffett, who arrived as a young analyst in 1954. The two remained close friends for life.

In 1955, Schloss left Graham-Newman to run his own fund, Walter J. Schloss Associates. He ran it for 47 years — from 1955 to 2002 — with his son Edwin joining in 1973. His compound returns over this period were approximately 15.3% annually after fees, versus 10% for the S&P 500. He achieved this record with minimal overhead, no computer models, no research staff, and no visits to corporate headquarters.

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Key Stories

The Superinvestor — Buffett featured Schloss prominently in his famous 1984 essay "The Superinvestors of Graham-and-Doddsville," presented at Columbia Business School. Schloss was Exhibit A in Buffett's argument that the success of Graham's students could not be explained by random chance — that value investing was a systematically superior approach.

The One-Room Office — Schloss operated from a small office shared with his son. He had no Bloomberg terminal, no research analysts, and rarely if ever visited the companies he invested in. He relied almost entirely on publicly available financial data — particularly balance sheets — to find statistically cheap stocks. Buffett cited this minimalism as proof that the Graham method did not require sophistication, just discipline.

The Anti-Buffett — While Buffett evolved toward buying wonderful businesses at fair prices, Schloss remained a purist. He bought mediocre businesses at excellent prices — classic "net-net" stocks trading below their net current asset value. He held dozens of positions at a time, diversifying widely. His approach had almost nothing in common with Berkshire's concentrated portfolio, yet both worked spectacularly — a testament to the breadth of Graham's framework.

16 Factors — Schloss once distilled his investment approach into 16 factors, including: "Try to buy assets at a discount rather than trying to buy earnings," "Don't be in too much of a hurry to sell," and "Don't buy on tips." These principles, in their simplicity, reflect the essence of Graham's philosophy.

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Impact on Berkshire

Schloss's impact on Berkshire was indirect but philosophically important.

Proof of Concept: Schloss provided the longest real-world demonstration that Graham's original framework — buying statistically cheap stocks — could deliver exceptional long-term returns. This validation was important to Buffett's intellectual heritage, even as Buffett himself moved away from the approach.

Intellectual Humility: Schloss reminded Buffett (and Berkshire shareholders) that there are multiple valid approaches to investing. Buffett never dismissed Schloss's more diversified, balance-sheet-driven style — he celebrated it, using Schloss as evidence that rationality and discipline matter more than IQ or access.

Teaching Tool: In the "Superinvestors" essay, Schloss served as Buffett's most powerful argument against the efficient market hypothesis. If markets were truly efficient, Schloss's 47-year record would be statistically impossible.

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Key Passages from Buffett's Letters

Walter Schloss has no connections or access to useful information. Virtually no one in Wall Street knows him and he is not fed ideas. He looks up the numbers in the manuals and sends for the annual reports, and that's about it. He simply has identification of value — through a statistical method — and he has the courage to buy large positions of things that look cheap.

— "The Superinvestors of Graham-and-Doddsville" (1984)

Our Graham & Dodd investors, needless to say, do not discuss beta, the capital asset pricing model, or covariance of returns. These are subjects of no interest to them. In fact, most of them would have difficulty defining those terms. The investors simply focus on two variables: price and value.

— "The Superinvestors of Graham-and-Doddsville" (1984)

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