The Winners That Get Away | Chris Davis and Robert Hagstrom on Holding Great Businesses

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On the latest episode of the 100 Year Thinkers, we bring together two of the best value investors and Buffett experts we know. Chris Davis joins Robert Hagstrom to discuss why great companies are so hard to hold, how to invest in a world of AI, and a lot more. We've included this episode in the Excess Returns feed. But to keep getting new episodes, subscribe to 100 Year Thinkers on any major podcast platform using the links in the episode description. Thank you for listening. We hope you enjoy the show.

Matt Zeigler (1:26)

You're watching Excess Returns, a channel that makes complex investing ideas simple enough to actually use, where better questions lead to better decisions. This is the 100 Year Thinkers. I'm Matt Zeigler, Bogumil Baranowski of Talking Billions is with me. We are joined by Robert Hagstrom of the Warren Buffett Way and CIO at EquityCompass. Say hello, Robert.

Robert Hagstrom (1:44)

Hey guys, how are we?

Matt Zeigler (1:46)

We have our esteemed extra special guest with us today, Chairman and Portfolio Manager at Davis Funds, Mr. Chris Davis. How are you doing, Chris?

Chris Davis (1:54)

I don't know why I'm esteemed when Robert's the one that's written three books or four books or something.

Matt Zeigler (1:59)

No. I'm starting right here though, Chris. We got to help Robert out. I'm not pandering Robert. Don't blush.

Robert's got a little bit of a Bill Miller complex here. You got to put the guy at ease. Say something nice about his books for him. Make Robert feel at home.

Chris Davis (2:15)

Well, one thing I want to point out is what Robert's wrote about Bill Miller from the beginning has proved to be exactly right. But because there was the financial crisis and the leg-based and changed the manager out, the general public has no idea how right Robert was. If you had been able to invest with Bill Miller from the time that Robert first developed the complex you reference to today, we would all be very, very well off. It was one of the great investment records, even including the dip, which everybody thought was the ending, but it wasn't.

Robert Hagstrom (2:56)

Now, I thought, Bill, someone said to me, he said, Robert, you wrote your dissertation on Warren Buffett, and you did your practical training with Bill Miller. You don't beat the market. Shame on you. So it's maybe more, it's more pressure than I think I want sometimes.

Matt Zeigler (3:15)

Let's dive in with this one, Chris. I'm asking you first because this is fundamental against. Once somebody finds a great business, and then they buy a little piece of it, what do you think goes wrong most often first?

Chris Davis (3:30)

Well, I mean, it's what goes wrong first, second, and third. Your question says they buy a great business. So of course, the only thing that could go wrong is they sell it. That's what goes wrong. It is, you know, by far, now, there's always a danger of learning what my partner, Janssen, calls a bull market lesson.

But by and large, if you have the right business, and this has dramatically been true for me, the biggest mistake you make is selling it. And you trim it at first, and then it looks so expensive compared to what you paid for it. You want the psychic pleasure of locking in that gain. Nobody ever went broke selling a profit, may taking a profit, and you continue to cut your flowers and water your weeds.

Bogumil Baranowski (4:26)

Chris, I learned the hard way that finding the right business, as Matt brought up, is important. But then how much you own of it is equally important. And from what I know, you went from a 5% position limit to roughly 10%.