Thomas Russo: the world’s greatest investors

A focus on long-term compounding became the core of Thomas Russo’s investment strategy.

17-3-24-Russo-634

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.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

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.

Did it work?

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.

Advertisement
Advertisement - Article continues below

What were his biggest successes?

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.

Advertisement

Recommended

Visit/520181/how-the-fear-of-death-affects-your-investment-process
Investment strategy

How the fear of death affects our investment processes

Many of our investment decisions are driven by one simple fact: the knowledge that, one day, we will be dead. Here, in an extract from his new book, J…
2 Jan 2020
Visit/520060/the-good-and-the-bad-investments-of-2010s
Stock markets

The good investments of the 2010s – and the bad

John Stepek takes a look back on which investments did well and which did badly in the decade that’s about to come to an end.
26 Dec 2019
Visit/2342/a-beginners-guide-to-investing-in-gold
Gold

A beginner's guide to investing in gold

Gold is the ultimate insurance policy - an essential part of your portfolio. Here's how to invest in it.
26 Jan 2020
Visit/9448/why-it-can-pay-to-invest-in-funds
Funds

Why it can pay to invest in funds

Many newcomers to equity investment are nervous about investing in individual firms – and that's where funds can help by spreading your risk. But how …
26 Jan 2020

Most Popular

Visit/economy/uk-economy/600824/how-the-bbc-can-survive-the-end-of-the-tv-licence
UK Economy

How the BBC can survive the end of the TV licence

The TV licence that funds the BBC is looking way past its sell-by date, says Matthew Lynn. Here's how it could survive without it
16 Feb 2020
Visit/economy/uk-economy/600837/rishi-sunak-new-chancellor-spending-splurge
UK Economy

Britain has a new chancellor – get ready for a major spending splurge

The departure of Sajid Javid as chancellor and the appointment of Rishi Sunak marks a change in the style of our politics. John Stepek explains what's…
14 Feb 2020
Visit/investments/property/600826/living-on-a-houseboat-the-pros-and-cons-of-a-floating-home
Property

Living on a houseboat: the pros and cons of a floating home

Living on a houseboat sounds romantic and peaceful. But it’s not as straightforward as it looks, says Nicole Garcia Merida
14 Feb 2020
Visit/investments/stockmarkets/european-stockmarkets/600725/is-2020-the-year-for-european-small-cap
Sponsored

Is 2020 the year for European small-cap stocks?

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, on why he believes European small-cap stocks are performing well.
12 Feb 2019