One of the most famous value investors of the past 100 years was a man named Christopher H. Browne.  His father started a small firm, Tweedy, Browne & Company, that was Benjamin Graham’s stockbroker.  It was through Tweedy Browne that Warren Buffett bought his personal shares of Berkshire Hathaway, taking control of the textile mill he would transform into one of the richest conglomerates on the planet.  Legendary value investor Walter Schloss worked by the Tweedy Browne water cooler where he ran his investment partnership with some index cards and a copy of Value Line.  This was a place where they all hung out when they were young, poor, and learning the ropes of capital allocation.

Chris BrowneLater, Tweedy Browne turned itself into a money management firm.  They first started an investment partnership and then launched a mutual fund called the Tweedy Browne Global Value Fund.  Up until that point, it was the only mutual fund I ever allowed my own family to own.  It remains the only mutual fund that I’ve ever owned personally.  When I was off at school, I had my parents setup accounts for their own retirement, taking their profits from the manufacturing business and buying shares in the portfolio that Chris Browne, his brother, and a few other directors managed using a strict value discipline.  That way, I could focus on studying classical music, history, philosophy, accounting, finance, economics, and other topics without having to worry about allocating their savings at the same time I was busy.  A few times a year, I’d go through the SEC disclosures, run my own intrinsic value analysis on their holdings, and decide I was happy with the situation.  I even helped some of my parents’ employees setup their own retirement accounts in the fund.

They held onto their shares during a time when the fund was in the top 10% of all global funds for more than a decade.  To this day, the profits on the Tweedy Browne portfolio, coming in the form of both capital gains and dividends, amount to more than 25.5% of their retirement holdings even though they no longer own a single share*.  From Johnson & Johnson to Novartis, Heineken to Nestle, the blue chips they indirectly owned through the fund itself did their job extraordinarily well.

I have tremendous affection for the people at Tweedy Browne.  When I was still in high school, I would write their office and request copies of their papers and speeches, which they would mail to me in the Midwest.  The documents would arrive in these green envelopes, all of which are still highlighted, marked, and sitting in my file cabinet.  I read, re-read, and over-analyzed nearly everything their office had published, going back decade after decade during which they compounded their partners’ money at 15%+ per annum by purchasing lower-risk assets.

[mainbodyad]I’d order the annual reports of the new stockholdings they acquired, trying to reverse engineer their logic.  Later, when I was in college, I wrote their office and they invited me to visit for a day, have lunch with one of their analysts, and poke around to see how it worked behind the scenes.  (I had a chicken salad sandwich with an analyst named Laura Jereski in a little conference room.  She was in the middle of a battle with a corporate tycoon named Conrad Black, who would later go to prison.  I very much doubt she’d remember the oddly-enthusiastic-music-major who peppered her with questions for a couple of hours about the structure of the fund, but it meant the world to me.  Seeing Will Browne in his pink cashmere sweater surrounded by all that investment research, quiet as a library, made me realize that, without a doubt, this was what I wanted to do with my life.  To my inner numbers geek, this was as close to paradise as one could find on Earth.)

Christopher Browne’s Death and the Inheritance War That Followed

Sadly, Chris Browne developed severe health problems a few years ago and died shortly after retirement at only 63 years old, though he continued to be productive, writing the bestselling Little Book of Value Investing and giving speeches.  His final days were not all roses as he reportedly battled severe alcoholism until the end and left in his wake a series of events that sound like something out of a Spanish soap opera.  Court documents say he passed away alone, in a bar, leaving behind a $260,000,000 net worth, almost all of which went to his significant other of ten years, an architect by the name of Andrew Gordon.  The two lived in their dream home in the Hamptons.  The house sat on an 18-acre estate and had a private beach, formal gardens, and pond.  They also had an apartment on Park Avenue.

Christopher Browne Little Book of Value InvestingAfter he drew his last breath, a dozen of Chris’s relatives and acquaintances, including his private chef (who wanted $4,000,000), sued Andrew, contesting the will and attempting to seize the assets.  Given that Chris and Andrew had never married despite spending a large part of their lives together (it had only been legal in Connecticut for a blink of an eye and New York was still two years away from offering equality), the whole thing was messier than it should have been had they simply tied the knot.  Ultimately, Andrew prevailed with a settlement secured in the midst of his own battle with cancer.  He (Andrew) held on for a few years before succumbing to his illness, passing away last autumn at the age of 52.  As per the terms of the estate plan, the property reverted to Chris’s family because he and Andrew had no children together.

The family got their hands on the house, put it on the market, and it just shattered real estate records, becoming the most expensive private home sale in the history of the United States, going for $145,000,000 as hedge fund manager Barry Rosenstein took possession of the keys.  While it is a nice home, it’s wildly overvalued, having no connection to any sort of intrinsic justification based on the numbers.  The irony is sublime.

The whole thing strikes me as sad.  To have accomplished that much in your life, and contribute so significantly to your field of work, yet die alone in a bar, have your last wishes contested by those supposed to care about what you wanted as they attempt to throw your significant other out on the street in the middle of a cancer battle that he will ultimately lose, and then have the estate you spent your final years building hawked to the highest bidder at auction seems like something out of a Charles Dickens novel.

It also proves Charlie Munger’s point that the age to which you live determines, to a great degree, your ultimate net worth and reputation.  Had he lived to be Munger’s age, and earned perfectly boring rates of return, Browne could have easily ended up with more than $4,000,000,000 as the compounding rate worked on a larger pool of capital.  Would anyone have known who Munger was if he had died at 62?  I’m not sure.  There’s a big element of random probability in life.  It’s not fair, but that’s the way it is.  We all have to suck it up and deal with it.

[mainbodyad]Additionally, the situation proves the wisdom, in some cases, of distributing assets prior to death and / or using iron clad trust funds with enough teeth to make those who would fight them think twice, as well as demonstrating how dangerous addiction is.  Addiction can take down even the most impressive intellects.  I think the man or woman who finds a way to cure addiction will be one of the most important figures in human history.  Almost no other endeavor could indirectly prevent so much human unhappiness, death, and destruction.

* Following the death of Christopher Browne, some retirements, and the most recent move from New York to Connecticut, most people I know have divested.  Update July 31, 2016: In the case of our family, ultimately we intend to make Kennon-Green & Co., the global asset management firm we are in the process of opening and that should begin taking clients within a couple of months if all goes expected, the central investment structure in our lives; the firm through which we seek to grow, preserve, and protect the capital we’ve earned and that will ultimately serve our future children and grandchildren.

  • Niket Dhruv

    Dear Joshua,firstly thanks for one more excellent article,it is sad to see family members and close ones fighting over the inheritance of such legendary people thereby destroying the legacy. We have numerous such incidents in India as well. I feel people should take a leaf out of Warren Buffet to understand how he grounded his family ( remember his children were sent to public schools like ordinary children ) as well as superbly planned his inheritance ( off-course most of it goes back to the society ! )

    • Angie

      Don’t compare the fights over estate in India to that of US, Niket. You will have to agree that in India, estate fights can result in bloodbaths, especially in lower rungs of society. But i agree with you on Warren.

      • Bob

        Angie, I suggest you look up the Ambanis.

    • LordSquidworth

      Having graduated from the US public school system I can only hope I can afford to send my kids to private school/have a tutor at home.

      Grounding your family is more about how the family functions at home. Mine was… not a mess but at the same time a complete disaster growing up. I’ll probably only continue to drift away, but I have no intention of having my family be the same when I get to that point.

  • Dan

    This is the highest nominal price paid for a home correct? I can’t imagine some homes from The Gilded Age such as Vanderbilt’s Biltmore or Breakers estate not costing more than $150,000,000 in inflation-adjusted dollars. What do you think?

    • Biltmore would be closest thing I can think of in American history getting up into this price range and not focusing on land itself (e.g,. sheer number of acres or a plot sitting on top of enormous oil reserves). It cost $5 million or so to build in 1895 and on an inflation-adjusted basis would cost around $128 million today using these inflation modification figures (PDF).

      Unlike the Browne house, Biltmore has an intrinsic value component beyond living there in that it generates $140 million per year in revenue from tourist and hotel operations, of which $126 million or so gets reinvested in the property itself. There are 75+ acres of amazing gardens. As a result, even if Biltmore is valued at less on paper, I’d consider it a far better investment because not only is it funding its own maintenance and growth needs, it’s throwing off millions of dollars in spare surplus every twelve months and has more raw land, albeit at a low return relative to more productive asset classes like outright business ownership (I’d gladly take $140 million worth of Coca-Cola shares any day if given the choice).

  • Angie

    “I think the man or woman who finds a way to cure addiction will be one of the most important figures in human history. ” Ha ha. You are missing the point, Joshua. Addiction to value investing is what got him to top rungs. Addiction is good. But what you addicted to is what will D.E.F.I.N.E you. What gives you a high? For you, i know that being immersed in stock analysis for hours is the answer. For many others, unfortunately, it is alcohol or drugs.

    So, if there is someone who builds a program that helps alcoholics and substance abusers to reorient their high-giving addiction towards something productive, this world will be a much happier and safer place to live in.

    My addiction? I will deal with that myself. It is something very good, though.

  • Pablo

    I feel for Christopher Browne. Perhaps if he had read, The Velvet Rage: Overcoming the Pain of Growing Up Gay in a Straight Man’s World, he made have had a better awareness of the source of his pain and overcome his alcoholism. 🙁

    • Jann Paxton

      Hello Pablo,

      I don’t want to sound confrontational, but I was Chris’s boyfriend for over a decade before he and Andrew became a “they” so, I think I knew Chris rather well. The only reason we stopped being a, “they” was due to a brutal conflict of careers and lifestyles. However, to his dying day we remained close friends and admirers of each others’ respective talents There was nothing about Chris’s life or character that should be pitied. He lived his life on his own terms and allowed others around him to do the same. He wasn’t burdened by the stigma of being Gay. Her used to say that, “no one is going to take issue with a millionaire’s sexual inclinations – especially when that homosexual is making them a consistent profit”. As for his “alcoholism – he drank because he liked to drink. That’s that! He knew it was bad for him and never complained about the side effects or blamed his sexuality or parents or anything. The only excuse he would jokingly offer was that he was an Irishman and was only being “true to his race”. There is much about Chris’s life and spirit that will never be known publicly. Things such as the sheer number of tuition fees and memorial services he paid for out of pocket for total strangers when they died from AIDS related illnesses- or the size of his contributions to medical and drug research programs. I’m fairly certain that, without his checks to Rockefeller Research Foundation, many more people would have died from the AIDS virus. Just ask Dr. David Ho about that one…
      Chris was one of the funniest, kindest, smartest, compassionate, and honorable men I have ever known and so, it makes me angry when I read that anyone would remember him as a person to be pitied. He wouldn’t have liked that – no, not at all.

      • FratMan

        Right on, Jann.

  • Connelly Barnes

    Activist value investor Barry Rosenstein. It seems strange he’d waste all that money given his bio where he seems pretty down to Earth.

  • AK Thakore

    Mr Kennon: First of all, a BIG thank you for educating all of us! Your statement in the footnote “held in custody at one of the largest financial firms in the United States” caught my attention. What are the risks of purchased stocks held in street name? Are these risks greater when the total portfolio value exceeds SIPC’s $500,000 limit?