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 smart man. Raised in Alabama from poor parents, he went to Yale on a scholarship and never looked back. At a very early age in his 20’s, he became partners with George Soros himself. Soros ran the now famous Quantum Fund, a hedge fund years ahead of its time, and Jimmy Rogers was his equal partner.
There was a time for a period approximating 10 years or so, when Jimmy Rogers was among the best informed people in the world. As he related the story to me once, he use to read 15, 16, 17 hours per day, just sucking up information, and then relating it to investing. In the 1970’s, when he ran the Quantum Fund with George Soros, they turned in a performance history that is the stuff of legends. The return was 40 times on your money in 10 years. During 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 old age of 37.
He has written two thoroughly entertaining and informative books for investors. You should read both of them. “Investment Biker” is one where he details his trip around the world on a motorcycle while investigating investment opportunities. The other is “Adventure Capitalist”, written years later, different trip, different bike (a modified yellow Mercedes this time, same objective-investment opportunities, same objective. He would get acquainted with the world on a first hand basis, and look for investment opportunities.
Jimmy Rogers is a investor that likes primary sources for information. He’s not the type that would read a Forbes magazine article on General Motors. He’s the type of investor that would read government abstracts of information about car manufacturing, and figure it out for himself. In our meetings, he said a couple of things to me, which have stayed with this investor for several decades now.
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 can never gain any other way.” As usual, Jimmy Rogers was right. You have to learn at the bottom, to know what to do at the top. It will also keep your head clear, when you are at the top, and everything from that view looks rosy and beautiful. It always looks that way before the fall from grace.
Jimmy Rogers also stated that he never uses excel spread sheets to do calculations on companies. He won’t let anyone who does analysis for him use excel either. He feels there’s something to be learned by doing it with pencil, eraser, and the old fashion way. It may take hours instead of minutes, but the data will have more meaning. The way the data moves when you change numbers will have more impact.
He also said that when he was investing in the old days, he would read the annual report of each company cover to cover. He said if you read the annual report you did more work than 90 out of a hundred people who are competing against you. He then said he would read the financials line by line, until he was through. You now did more work than 99 out of a hundred people. Finally, he would read each and every footnote about the company. There’s not one investor in 10,000 that did this type of work. It takes discipline, focus, desire, and a real appetite to make the big bucks that are only available to the truly extraordinary investor.
Recently while on 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 down and dirty when he’s doing research. He has no interest in talking to the finance ministers. He wanted to know what the guy in the street was thinking. He wanted to know if the economic situation was conducive to doing business. Was it smooth or difficult?
Warren Buffett is fond of saying about himself that he is the best allocator (aka money manger) of capital in the world. He also said this only works if you are in an economic environment where such a skill is appreciated. Had he been born in East Africa, he would have been playing drums somewhere. Bill Gates prior to 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.
All of this relates to Jimmy Rogers, who feels compelled to understand the world in a first hand way before he will invest in it. Take Zaire in Africa, the most fertile soil on the planet earth. You could practically throw seeds at the ground in Zaire, and they will grow. It’s unbelievable that with this potential, Zaire is a net importer of food. Why you ask, the road system is in disarray, and there is very little infrastructure. The old African colonies where the white colonialists profited from the blood of Africa, has been replaced by black ruled dictatorships, with the same, precise lack of interest in their people that was reminiscent of the white colonialists.
When Jimmy Rogers travels through a country, he is able to deduce if the climate is ripe for investment. If so, he makes his bets on physical commodities. He wants to own oil, mineral companies, copper, tobacco, brewing, or something, anything that’s tangible, that’s real. This is because such a country must export whatever they have, to begin the wealth creation process. He believes the next major bull market will be in commodities which we are already experiencing.
Jimmy Rogers is an investor who buys when there’s blood in the streets, when nobody else will touch an investment, and he has been uncannily accurate in his purchases. As a top down investor, his bets are on countries, not individual companies as a rule. 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. The Indians don’t know how to do business. If an Indian visits the Taj Mahal which is magnificent, he is charged 20 cents to get in. An American is charged almost $20. The Chinese have more than 12 times the income from tourism than do the Indians. Why, because the Chinese know how to do business, and the Indians know how to screw it up. It’s this type 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 bottoms-up approach to investments. We want to look at a company first, without regard for the economy and the industry. Unless the company is going to make it on its own, we have no interest. Once the company passes muster, than we look to see if the industry or economy can provide a tailwind at the company’s back. If so, we are on our way, because we will have a big hit on our hands.
We did this with Walt Disney a number of years ago, and Tyco more recently. Nobody wanted to own either company. With Disney, the amusement parks were empty. With Tyco there was a massive corporate embezzlement causing institutional investors to scatter to the wind. Our performance history will show we made a killing with both stocks. For more information click here StocksAtBottom.com