Glenn Greenberg was born in New York in 1947, the son of baseball player Hank Greenberg. After studying English at Yale and New York University, he set up Chieftain Capital Management with John Shapiro in 1984. In 2009 they split and he founded Brave Warrior Advisors, which manages nearly $3bn worth of assets.
What was his strategy?
Greenberg was a value investor, although he sought out firms that looked inexpensive rather than dirt cheap. His favourite technique was to gauge future cash flows, discounting future profits by at least 20% (rather than the more usual 10%-12%). He thought this meant that even if his predictions proved too optimistic he would still end up making money. He also believed in having a very concentrated portfolio. At least 5% of the total portfolio was allocated towards each investment, and it rarely contained more than ten different companies.
Did it work?
Chieftain started out badly, losing about a fifth of its initial capital within a few months. However, it ended its first year with a positive return. Between 1984 and 2009 the fund produced an annual return of 18%, compared with the market's 12% (though the stated figure doesn't adjust for fees so investors received less). Assets under management also increased from $43m in 1984 ($98m in 2015 money) to $3bn in 2009. Brave Warrior has been volatile, but it has returned an annual average of 16% since 2009.
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What was his best investment?
During the late 1990s the market believed that cable television companies would be destroyed by competition from satellite television. However, Greenberg disagreed, pointing out that satellite TV had a number of technical drawbacks. As a result, Chieftain piled into cable firms to such an extent that they comprised around 40% of the portfolio. The bet paid off handsomely as the shares rocketed.
What can we learn from Greenberg?
Greenberg's experience shows that limiting the number of positions you take in the stocks of individual companies can help you focus your energy on a few key investments. Chieftain's success also demonstrates the importance of doing your own homework. But lack of diversification does of course have its downside: Brave Warrior Advisors was recently hit by the collapse in the stock of Valeant Pharmaceuticals, a controversial and debt-laden healthcare firm.
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