Steve Johnson: The search for extreme dislocations

The Rules of Investing

Livewire Markets

When Walter Schloss founded the funds management firm that bore his name in 1955, markets were a very different place. Schloss harnessed the power of Ben Graham's "net-nets" strategy and managed to outperform the market by more than 5% p.a. over the next 45 years. But could such a simple strategy work in today's deeply researched markets? Steve Johnson, Chief Investment Officer of Forager Funds thinks so. But why isn’t every fund manager pursuing this strategy?

“I still know people who are making exceptional returns doing that… Does it still work? Yes, it absolutely still works if you’ve got $500,000 or $1 million dollars.”

In this week’s episode of The Rules of Investing podcast, we discuss the biases that fund managers and private investors are most susceptible to, how to separate luck from skill, and his approach to properly valuing a business.

Further reading and listening


  • 1:33 - The road from Macquarie to Forager
  • 5:45 - On the millionaire's factory and Walter Schloss
  • 12:30 - The dangers of anchoring and the narrative bias
  • 17:57 - Suck it up and admit you were wrong
  • 22:06 - Luck versus skill
  • 26:16 - Investing mistakes: a couple of real clangers
  • 34:08 - This time is always different
  • 39:12 - The one immutable rule of investing
  • 42:37 - It's not about building complicated DCF models
  • 47:17 - Arriving at the appropriate risk-free rate
  • 50:50 - Superforecasting
  • 52:19 - Find the approach that works best for your skill set
  • 53:20 - Microsoft: robustness and sustainability

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The Rules of Investing
Livewire Markets

The Rules of Investing is one of Australia's top investing podcasts. We interview the leading investment minds from Australia and overseas to better understand their processes and philosophy. After launching in October 2017, there have been over...

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