I have come into contact with this legendary investor several times in my life, including a lunch or dinner here and there. First, we are dealing with a very intelligent man. Raised in Alabama to poor parents, he went to Yale on a scholarship and never looked back. In his early 20s, he became a partner of George Soros himself. Soros ran the now famous Quantum Fund, a hedge fund ahead of his time, and Jimmy Rogers was his equal partner.
There was a time, for a period of about 10 years, when Jimmy Rogers was among the best informed people in the world. As he told me the story once, he used to read 15, 16, 17 hours a day, just absorbing information and then relating it to investments. In the 1970s, when he ran the Quantum Fund with George Soros, it became a performance story the stuff of legends. The return was 40 times his money in 10 years. Over the same time period, the stock market was up a small fraction of that number. He retired from his day job with George Soros at the ripe age of 37.
He has written two very entertaining and informative books for investors. You should read both. “Investment Biker” is one in which he details his trip around the world on a motorcycle while researching investment opportunities. The other is “Adventure Capitalist”, written years later, different journey, different bike (this time a modified yellow Mercedes, same goal-investment opportunities, same goal. I would see the world first hand, and look for investment opportunities.
Jimmy Rogers is an investor who likes primary sources of information. He’s not the guy who would read a Forbes magazine article about General Motors. He’s the kind of investor who would read government summaries of auto manufacturing data and figure it out for himself. In our meetings, he told me a couple of things that have stuck with this investor for several decades.
He asked me if I had ever been bankrupt. I told him no. He said: “Too bad, there’s something about being at the bottom, once or twice in your life, that teaches you things you could never win any other way.” As usual, Jimmy Rogers was right. You have to learn from below, to know what to do from above. He will also keep your head clear, when you are on top, and everything from that view will look rosy and beautiful. It always looks like this before the fall from grace.
Jimmy Rogers also stated that he never uses Excel spreadsheets for business calculations. He also won’t let anyone doing analysis for him use Excel. He feels there is something to be learned by doing it with pencil, eraser and the old fashioned way. It may take hours instead of minutes, but the data will have more meaning. The way the data moves when you change the numbers will have more impact.
He also said that when he was investing in the old days, he would read each company’s annual report from cover to cover. He said if you read the annual report you did more work than 90 out of a hundred people who are running against you. He then said he would read the finances line by line, until he was done. Now you did more work than 99 out of a hundred people. Finally, I would read any and all footnotes about the company. There is not one investor in 10,000 who has done this kind of work. It takes discipline, focus, desire, and a real appetite to make the big money that is only available to the truly extraordinary investor.
Recently, during that second trip around the world, Jimmy Rogers and his wife Paige Parker traveled 152,000 miles, visited 116 countries, and took 3 years. Jimmy likes to get dirty when he’s investigating. He has no interest in talking to finance ministers. He wanted to know what the guy on the street was thinking. He wanted to know if the economic situation was conducive to doing business. Was it easy or hard?
Warren Buffett likes to say about himself that he is the best allocator (aka money manager) of capital in the world. He also said that this only works if he is in an economic environment where such ability is appreciated. If he had been born in East Africa, he would have been playing the drums somewhere. Bill Gates, before the age of the personal computer, would be a librarian in some isolated part of Vermont trying to live up to his father’s reputation.
This all ties back to Jimmy Rogers, who feels compelled to understand the world first hand before investing in it. Take Zaire in Africa, the most fertile soil on planet earth. You could practically drop seeds on the ground in Zaire, and they will grow. It is incredible that with this potential, Zaire is a net importer of food. Why do you ask, the road system is messy and there is very little infrastructure. The former African colonies where white colonialists profited from the blood of Africa have been replaced by black-ruled dictatorships, with the same precise lack of interest in their people that the white colonialists remembered.
When Jimmy Rogers travels across a country, he is able to tell if the climate is conducive to investment. If so, he bets on physical merchandise. He wants to own oil companies, minerals, copper, tobacco, brewery or something like that, anything that is tangible, that is real. This is because such a country must export everything it has to start the process of creating wealth. He believes that the next big bull market will be in commodities, which we are already experiencing.
Jimmy Rogers is an investor who buys when there is blood on the streets, when no one else will touch an investment, and he has been astonishingly accurate in his purchases. As a top-down investor, he typically bets on countries, not individual companies. His observations are always brilliant, incisive and to the point. He is arrogant and intolerant of small talk.
This is what he says about India as an example. He thinks China blows them away. Indians don’t know how to do business. If an Indian visits the Taj Mahal, which is magnificent, they charge 20 cents to enter. An American is charged almost $20. The Chinese have more than 12 times the income from tourism than the Indians. Because the Chinese know how to do business and the Indians know how to ruin business. It’s this kind of thinking on Rogers’ part that makes him the MASTER investor that he is.
We are similar to Jimmy’s thinking here at StocksAtBottom.com in that we have a bottom-up approach to investing. We want to look at a company first, without taking into account the economy and the industry. Unless the company does it on its own, we have no interest. Once the company passes the test, we look to see if the industry or the economy can provide a tailwind in the company’s favor. If so, we’re on our way, because we’ll have a big hit on our hands.
We did this with Walt Disney several years ago and Tyco more recently. Nobody wanted to own either company. With Disney, the amusement parks were empty. With Tyco there was massive corporate embezzlement that sent institutional investors flying to thin air. Our performance record will show that we made a killing with both stocks. For more information, click here StocksAtBottom.com
