Friday, January 14, 2022

I was on the Benzinga Cannabis Hour yesterday; A tribute to Lou Simpson; My life insurance

By Whitney Tilson

1) In my December 29 e-mail, I wrote that the AdvisorShares Pure U.S. Cannabis Fund (MSOS) "is my favorite pick for 2022, for reasons my friend Doug Kass outlined last week."

Following up on that, the two guys who host the Benzinga Cannabis Hour invited me on their show yesterday, which you can watch here (I come on at 6:30).

I really enjoyed our conversation. Over 36 minutes, we not only discussed why I think the cannabis sector is attractive, but we also touched on personal finance, especially to young people, as I shared the investment advice I gave my two older daughters (ages 25 and 22) when they graduated from college.

2) On Wednesday, I wrote about how Bill Miller was a major influence in my early investing career. Another person I'd like to acknowledge is Lou Simpson, who passed away last week at the age of 85. Here's the Chicago Tribune's obituary.

Simpson is little-known outside of the value investing community because he spent most of his career in the shadow of the legendary Warren Buffett (long ago, he was even considered a possible successor). That was fine with him, as Simpson preferred a low profile (at one time, he gave just two on-the-record interviews over 14 years).

But he was an investing legend in his own right, compiling a truly extraordinary track record managing GEICO's investment portfolio for 25 years from 1980 through 2004.

Because the auto insurer was majority owned by Berkshire Hathaway (BRK-B) (and became a wholly owned subsidiary in 1996), one would have expected Buffett to invest its portfolio, as he has always done with the rest of the conglomerate's assets. But because he had so much confidence in Simpson, Buffett chose to leave him in charge.

It was a wise decision. In his 2004 letter, Buffett shared Simpson's entire track record, with the comment:

Take a look at the facing page to see why Lou is a cinch to be inducted into the investment Hall of Fame.

While a 6.8% spread may not seem like much, over 25 years it's the difference between 100 times and 23 times...

How did Simpson do it? In his 1986 shareholder letter, Buffett explained:

These are not only terrific figures but, fully as important, they have been achieved in the right way. Lou has consistently invested in undervalued common stocks that, individually, were unlikely to present him with a permanent loss and that, collectively, were close to risk-free.

For more on the keys to Simpson's success, I recommend reading this collection of quotes from the handful of interviews he did over the years: Wise Words from Lou Simpson. Excerpts:

  • We concentrate our holdings in a few companies that meet our investment criteria. Good investment ideas – that is, companies that meet our criteria – are difficult to find. When we think we have found one, we make a large commitment. The five largest holdings at GEICO account for more than 50% of the stock portfolio.
  • We are sort of the polar opposites of a lot of investors. We do a lot of thinking and not a lot of acting. A lot of investors do a lot of acting, and not a lot of thinking.
  • Attempting to guess short-term swings in individual stocks, the stock market or the economy is not likely to produce consistently good results. Short-term developments are too unpredictable.
  • One lesson I have learned is to make fewer decisions. Sometimes the best thing to do is to do nothing. The hardest thing to do is to sit with cash. It is very boring.
  • We try to be skeptical of conventional wisdom and try to avoid the waves of irrational behavior and emotion that periodically engulf Wall Street. We don't ignore unpopular companies. On the contrary, such situations often present the greatest opportunities.
  • One of the things I have learned over the years is how important management is in building or subtracting from value... You can have all the written information in the world, but I think it is important to figure out how senior people in a company think.
  • We try to be disciplined in the price we pay for ownership even in a demonstrably superior business. Even the world's greatest business is not a good investment if the price is too high.
  • We do not have any hard and fast rules on selling. We do not sell that well.
  • If I've made one mistake in the course of managing investments it was selling really good companies too soon.

3) I recently received this e-mail from reader Stuart K.:

While I think you're nuts, I enjoy reading about your exciting life and appreciate the stand you take on vaccines. I wouldn't want to be your health insurance company.

I'm incredibly healthy, so think Stuart meant life insurance company – LOL!

I agree!

This reminds me of a funny story...

More than a decade ago, I bought a $10 million life insurance policy to make sure that my family would be OK financially if I bit the proverbial big one...

Then, when my midlife crisis kicked in seven years ago and I started doing high-risk adventures like training with Navy SEALs, doing 24-hour races, climbing tall peaks like the Matterhorn, Eiger, Cotopaxi, and El Capitan, etc., someone told me that if I died doing something along those lines, the life insurance company likely wouldn't pay because there are usually exclusions if you die during certain high-risk activities.

So I called the customer service line of my insurer, Northwestern Mutual, and asked about this.

I got a very clear reply: "There are no exclusions."

"To be clear," I asked, "No matter how I die, you'll pay?"


I was puzzled. "I don't get it. What about insuring a race car driver or professional deep-sea diver?"

The representative answered: "We take that into consideration when we decide whether to issue the policy and, if so, how we price it. But once we issue it, there are no exclusions."

I asked, "Do all life insurance companies have the same policy?"


When I hung up the phone, I shouted to my endlessly patient and loving wife, who was in the next room: "Hey Susan, great news! If I die, no matter how it happens, you and the girls get $10 million!"

She laughed...

Best regards,


P.S. I welcome your feedback at [email protected].

P.P.S. The Empire Financial Research offices are closed on Monday in observance of Martin Luther King Jr. Day. Look for my next daily e-mail in your inbox on Tuesday, January 18.

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Empire Financial Research

Whitney Tilson

Empire Financial Research founder and CEO Whitney Tilson is the editor of the Empire Investment Report, a monthly investment advisory that focuses on cheap, high-quality stock ideas.

Whitney graduated with honors from Harvard University and Harvard Business School, where he earned an MBA and was named a Baker Scholar. Whitney spent nearly 20 years on Wall Street, during which time he founded and ran Kase Capital Management, growing assets under management from $1 million at inception to a peak of $200 million.

Once dubbed "The Prophet" by CNBC, Whitney predicted the dot-com crash, the housing bust, the 2009 stock bottom, and more. Now, he's sharing his secrets and strategies with followers of his latest endeavor, Empire Financial Research.

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