Allan Mecham: Is This Stock Guru the Next Warren Buffett?
Some phenomena happen so rarely that we'll wait years before seeing them, like the reappearance of Halley's Comet or the Detroit Lions winning their first Super Bowl. In the same vein, there are rare visionaries like Albert Einstein, Steve Jobs and Warren Buffett.
In the business world, Buffett is one of the biggest names in the 21st century, with an unerring, almost psychic ability to predict the best market ventures -- and a subsequently enormous net worth ($72.2 billion, according to Forbes). Of course, that's all offset by his humble, folksy attitude toward life and money. Sure, he has his contemporaries, but nobody even comes close to mastering his investing touch.
At 84, Buffett can't hog the mantle of top investor forever. Industry experts and columnists point to several people who could replace Buffett as the de facto investing powerhouse; one name that keeps getting mentioned as an up-and-coming investing star is that of 37-year-old Allan Mecham, a Utah-based investor known as "The 400 Percent Man" for his mind-boggling rate of return that's left Wall Street in the dust. Mecham's background and uncomplicated approach to investing also bear an uncanny resemblance to Buffett's.
What makes Mecham such a curious potential successor to Buffett is that he's as equally auspicious as he is enigmatic. He's a young investor and partner with a small firm in Salt Lake City -- Arlington Value Capital -- whose hedge fund structure regularly turns profits, even during the 2008 economic downturn, according to MarketWatch. Mecham has been in the investing game for 15 years and, according to MarketWatch, has "earned an astounding cumulative return of more than 400 percent by investing in the stock of U.S. companies - many of them larger ones like Philip Morris (PM), AutoZone (AZO) and PepsiCo (PEP)."
Mecham's portfolio is valued at more than $443 million, according to Dataroma. Some of those investments are similar to Buffett's, including a 23 percent stake in Bank of America (BAC) and over 10 percent in none other than Berkshire Hathaway (BRK-A), bought up when Buffett's stock was low. Mecham's strategy -- and trusty gut instincts -- are also reminiscent of the Oracle of Omaha.
"What's particularly interesting is that Mecham simply seems to follow his nose after reading anything and everything and then just thinking about the best route to take," writes Michelle Jones of ValueWalk. "Does that sound familiar? He doesn't use complicated algorithms or technical data to figure out where to put his money. He simply does the homework and thinks before making a decision."
He Reads and Thinks
"Mecham doesn't even like to build spreadsheets. He doesn't care about the next quarter, he cares about the next ten years," writes Brett Arends of Forbes. "He doesn't subscribe to expensive data terminals. He rarely even uses the Internet. Mecham downloads company 10-K filings and reads and reads and reads ... and thinks and thinks and thinks."
These aren't the only ways Mecham is like a modern-day Buffett. A college dropout, his investment savvy and success are largely self-made. Somewhat shy and reclusive, he's not the ostentatious banker type, but low-key and humble, not unlike Buffett -- who, with more money in the world than God, still lives in the same Omaha house he bought back in the 1950s.
"Mecham doesn't look, talk or act like a typical Wall Street manager," writes Arends. "He's soft-spoken. He doesn't use jargon. He dresses like he works in a bookshop, with a patterned shirt and a plain tie. And the story of his success, arguably, says a lot about the flaws of the fund-management industry. By his own account, and those of other investors who have vetted his fund, Mecham has no secret sauce or amazing algorithm; what's extraordinary about this young man is how ordinary he is."
A Simple Investment Style
Buffett took a seemingly archaic approach to investing in the 1950s, was a millionaire by the 1960s, and by the 1990s, a billionaire. In the 21st century, an investor like Mecham is following this simple, linear path.
"What makes Mecham's story especially interesting is that he has produced this extraordinary performance without being an astrophysics PhD or having access to a more powerful computer than anyone else," writes Arends. "Most investors turn gooey-eyed over talk of 'proprietary algorithms' or quantitative analysis. The more complicated it sounds, the more excited they get. But Mecham hasn't done things that are really complicated. He's done things that are really quite simple."
"The way Mecham runs money is very different from how typical asset managers operate," writes Ashby Monk of the Institutional Investor. In fact, Mecham's basic investment style will sound familiar to anyone familiar with Warren Buffett. Mecham seeks to invest in businesses with healthy long-term prospects, a steady revenue stream, impressive, solid management, and a defense system against competitors -- sort of a financial barrier. Another Buffett-ism Mecham seems to have picked up is financial patience.
The World According to Mecham
Here are some of Mecham's favored investments rules, according to MarketWatch:
- Focus on the positive. Ignore the drops and dips in the economy and look instead at stable businesses that can thrive during any financial climate.
- Keep only a few investments. Mecham believes against stock diversification; the most successful private-investment firms have the advantage of keeping just a few key investments close to the belt in order to see some financial returns.
- Favor comprehension over spreadsheets. Instead of deciphering spreadsheet upon spreadsheet, Mecham prefers to get a better understanding of a company, like its operations, management and clients, in order to make the best investment decisions. (Taken right out of Buffett's playbook -- the Oracle only invests in what he knows.)
- Think about the long term. Warren Buffett has been doing this for years: Forecast where a company will be, and what it'll be doing, in decades, not quarters or even years.
- "Activity is the enemy of returns." Mecham's signature quote emphasizes that inactivity - sitting still and doing nothing -- is a big secret for success in the long run, rather than responding to every single market fluctuation, blip or change.
Who else might assume the Buffett throne? There's Ted Weshcler and Todd Combs, two of Buffett's stock pickers at Berkshire Hathaway.
Forbes' Ken Kam taps four men from the Marketocracy Explore Team -- Justin Uyehara, Mike Koza, Kai Petainen and Marcus Eder -- as potential future Buffetts.
Guo Guangchang is known in the Far East as the "Warren Buffett of China," according to The Motley Fool, which also pegs Biglari Holdings' Sardar Biglari (who shares the same birthday as Buffett) as a contender.
But do they have what it takes to match the investment hype of an Allan Mecham? Only time will tell who'll become America's next biggest investor. In Buffett's own words, "Time is the friend of the wonderful business, the enemy of the mediocre."