Jean-Marie Eveillard - Taking a Top-Down Approach to Value Investing
Value Investing with Legends
Is There a Side to the Debate?
From day one for myself and for my staff, we look at accounting numbers as estimates. And so we always look closely to try and figure out whether the accounting makes sense or whether it does not make sense. There has been scandal, you know, accounting scandals in France and in Italy and elsewhere, even in Germany. Yes. I'll go training and stuff like that.
Today’s conversation is with international value investor, Jean-Marie Eveillard. As portfolio manager of the Société Générale International Fund, later becoming the First Eagle Global Fund, where he returned an annualized 15% for over 25 years. In 2001, Jean-Marie and co-manager Charles de Vaulx were named Morningstar International Stock Fund Managers of the Year and later in 2003, Jean-Marie was chosen as one of the two inaugural awardees of the Morningstar Fund Manager Lifetime Achievement Award.
Shortly after starting as an analyst with Société Générale, Jean-Marie became exposed to Ben Graham and the principles of value investing. Despite his passion and insights, it was many years before he was given the position of portfolio manager and finally able to put those principles to work. During his tenure as portfolio manager, Jean-Marie has been at the helm during some of the most challenging times for value investors. His ability to adapt his investment approach to the changing conditions has been key in his ability to produce above average results.
On this episode, Jean-Marie and I talk about his changing roles over his years at Société Générale and then First Eagle, why he was so intrigued by Ben Grahams and Warren Buffet’s investment approaches, the lessons he learned about client management while his fund was underperforming compared to market, and so much more!
Key Topics:
- How one good course experience started Jean-Marie on the path to a career in the investment world (2:32)
- Jean-Marie’s role at Société Générale’s New York branch (5:45)
- Jean-Marie’s first introduction to Ben Graham (6:44)
- Why Ben Graham’s writings on investing helped Jean-Marie find his own investment approach (7:07)
- The changing perspectives on frameworks in academic finance in the 1970s (8:45)
- Jean-Marie’s disappointing return to the Société Générale head office in Paris (12:11)
- How Jean-Marie finally got the opportunity to manage a fund himself (14:25)
- The process Jean-Marie used to identify and value potential investments when he took over his first fund (17:54)
- Why the 1970s and 1980s were particularly good periods to take a traditional value investing approach (19:59)
- The differences between the traditional Ben Graham approach and the Munger-Buffet approach (21:42)
- Why Jean-Marie prefers the Munger-Buffet approach to value investing (22:21)
- The lesson Jean-Marie learned after buying Lindt & Sprüngli stock (23:39)
- One of the drawbacks with holding overvalued stocks under the Munger-Buffet approach (26:59)
- Why humility is important for a successful money management career (28:50)
- The client management mistake Jean-Marie made in the late 1990s (31:49)
- The growth of the First Eagle Global Fund from $15 million to $6 billion between 1987 and 1997 (32:42)
- Jean-Marie’s perspective on investing in tech stocks (35:56)
- The impact of the bursting of the NASDAQ on the fund (40:06)
- Why Jean-Marie’s move to advisor of the fund was so short-lived (41:22)
- How the fund benefitted from its holdings in the Bank for International Settlements (42:40)
- Why Jean-Marie believes that value investors should pay closer attention to the macro-economic environment (47:31)
- The challenges posed to balance sheet-focused investors by the growth of the service-based economy (52:22)
- Why Jean-Marie’s first step in assessing a company is to closely review the accounting numbers (55:37)
- The changing future of value investing (58:17)
- And much more!
Mentioned in this Episode:
- Jean-Marie Eveillard’s Book | Value Investing Makes Sense
- First Eagle Investment Management
- Benjamin Graham and David L. Dodd’s Book | Security Analysis
- Benjamin Graham’s Book | The Intelligent Investor
- William White’s April 2006 Paper | Is Price Stability Enough?
- Sidney Homer and Richard Sylla’s Book | A History of Interest Rates
Thanks for Listening!
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