If you’ve listened to Bruce Greenwald’s lectures on franchise investing, you’ve noticed that he often mentions Glenn Greenberg. As Bruce tells it, Glenn started in 1984 and if you look at his performance all the way up until 2008 you not only see returns highly correlated to Buffett’s, his record might even be a little better.
Unfortunately Glenn got walloped starting with 2008 and the (vague) explanation seems to be that he had moved away from his initial simple strategy and started relying on numbers coming out of employees’ models. Now Glenn has a new firm and is back to his old approach, which apparently relies more on sketching out ideas on a legal pad than messing with spreadsheets and models.
Bruce talks about Greenberg when talking about the whole expected rate of return approach covered before. You remember…
… and Bruce says this is how Buffett and Greenberg look at things. He says Buffett’s hurdle is 13% while Greenberg’s is 15%.
Until recently I just accepted it on faith that since Bruce knows both of them, his equation is the exact equation they use! I now realize that what Greenwald was really saying is that they take a rate of return approach when evaluating potential investments as opposed to the whole game of trying to come up with an intrinsic value.
Just as there are a variety of ways to estimate intrinsic value, there are a variety of ways to estimate rate of return. In Greenberg’s case, it’s more like R = FCF/P + growth where ideally that first term is 10% right out of the gate. Then as long as some growth materializes, you should do fine.
Below are a few resources in case you want to familiarize yourself with the man Bruce seems to respect so much.
(1) Greenberg’s guest lecture in Bruce’s class:
(2) A long interview with Greenberg:
Graham & Doddsville Spring 2010
(3) A quick profile of Greenberg’s older firm:
(4) Greenberg’s current holdings:
Brave Warrior Capital