A great quote from Bob Benmosche, CEO of AIG, on his view on ‘renters’ and ‘owners’ of companies. The quote comes from a recent analyst presentation.
One thing that I did learn from Wall Street, it is a simple rule, all of you in this room [referring to the analysts] are not looking for great companies. You may find one and that would be wonderful, but it has nothing to do with your decisions. You are looking for a great stock. You want to buy that stock, you want it to go up, and when you have gotten enough you want to get out of it. You are renters. You are not owners. Some of you are, but mostly you are an owner because you are trapped. So I’m looking as owners and thinking about the fact that I want to have a great company and I have got to have a good stock that you are all interested in.
I for one agree that even though I call myself a value investor there is more of a bias towards renting. Infact most value investors are ‘renters’ even though they might claim to be owners of companies. The approach that you believe a company is worth X and once the stock, or valuation, gets to 90% of X then you get out is an approach of a ‘renter’ not ‘owner’. Any investment with a bias towards getting out of the stock at a certain valuation is a ‘renter’ approach. Very few individuals have access to capital in a similar way as Berkshire Hathaway, or have investors that will give you the freedom to be true owners of the company.