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Thomas Russo: the world’s greatest investors
A focus on long-term compounding became the core of Thomas Russo’s investment strategy.
Thomas Russo was born in 1955 and grew up in Titusville, Pennsylvania, a small town best known as the birthplace of the oil industry. He graduated from Dartmouth College with a degree in history in 1977 and from Stanford University with degrees in law and business in 1984. He then joined Ruane, Cuniff & Goldfarb, where he worked on the firm's flagship Sequoia Fund. In 1989, he joined Gardner Investments (now Gardner Russo and Gardner), a Pennsylvania-based firm catering mostly to high-net-worth individuals, where he manages the Semper Vic investment partnership.
What is his strategy?
In 1982, Russo attended a talk by Warren Buffett at Stanford, in which Buffett discussed how firms that were able to reinvest earnings and grow steadily over the long term offered large tax advantages for investors (since unrealised capital gains are not taxed). This focus on long-term compounding became the core of Russo's strategy.
He also took Buffett's advice to invest in high-quality firms with trustworthy management that were in a position to suffer short-term costs in the interests of building a strong long-term market position. Russo chose to focus mostly on firms with strong brands in a handful of industries (food, beverage, tobacco and media) and invested heavily outside the US at a time when international investing was unusual.
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Between 1990 and 2016, Semper Vic returned more than 12% per year, compared with around 9% for the S&P 500 (including reinvested dividends). Garder Russo and Gardner now oversees around $12bn in assets in Semper Vic and individual accounts.
In 1989, Russo began investing in Weetabix, which at the time was a family-controlled firm. Back then, the firm was trading at under £6 per share and he estimated that it was worth £13 per share. Russo ended up owning almost a fifth of the firm, which was sold to a private-equity group for £54 per share in 2003.
What lessons does his approach hold for investors?
As a private investor with limited resources, focusing on a few intrinsically attractive industries that you know well can be a wise strategy. While many people shun family firms, well-run ones can shrug off pressure from short-termist shareholders and invest for long-term growth. Many investors overlook tax issues, but this can have a large impact on returns and investors should aim to minimise taxes where possible.
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