According to the Chicago Tribune, Lou Simpson is retiring from GEICO. Warren had the following to say about Lou’s retirement:

“Obviously, I would keep him employed till he was 100. I was very surprised when he called me a month ago and said, ‘At 74, I’d just as soon turn it over to somebody else.’ It was not a happy day at Berkshire. But I’m happy for him.”

Throughout the years, investors were confused as to which stock picks belonged to Simpson’s and which stock pick’s belonged to Buffett’s. In my opinion, anything that was larger than $1 billion belonged to Buffett and anything below $1 billion belonged to Simpson. On that particular subject matter, Buffett had the following to say:

“People are always attributing to me what he’s doing,” Buffett said.

Warren Buffett later states what I and other value investors hard thought all along.

“But here’s how to figure it out: “If you see a purchase on a company in the $300- to $400-million range, odds are very good that’s Lou’s,” Buffett said. “I’m going to want to buy at least $1 billion of whatever it is we buy. So Nike, those things are his, while Wells Fargo, Kraft, those will be mine.”

How to figure this out?

Use Warren Buffett‘s 20 ticket punch card in which he describes as:

“I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches – representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all. Under those rules, you’d really think carefully about what you did, and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

The Chicago Tribune article finally gives us some insight intro Lou Simpson’s investing process which has long been a mystery to value investors.

“My approach is eclectic,” Simpson said. “I try to read all company documents carefully. We try to talk to competitors. We try to find people more knowledgeable about the business than we are. We do not rely on Wall Street-generated research. We do our own research. We try to meet with top management.”

Lou Simpson on whether one should publicize his ideas (reason why never knew anything)

“So many people broadcast what they buy or sell and it works against them,” Simpson said. “I’m in favor of people not knowing what we’re doing until the last possible time.”

Original Source:

http://www.chicagotribune.com/business/ct-biz-0822-simpson-confidential-20100822,0,2220225.column

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