It’s Time for Investors to Re-Learn the Lost Art of Reading
Published: April 1, 2016 / Author: Jason Zweig, Wall Street Journal
Fund manager Geoffrey Abbott is extremely committed. Or maybe he needs to be committed.
Every day for the past seven weeks, Mr. Abbott has read an average of 39 letters that CEOs write to shareholders in their companies’ annual reports. His goal is to peruse the annual report from each of the 3,000 largest companies in the U.S. This past week, Mr. Abbott, who runs a small New York investment partnership called GCA Capital, plowed through the I’s and moved into the J’s. That puts him him on track to finish with Zumiez, Zynerba Pharmaceuticals and Zynga by the end of May, when Mr. Abbott will turn 30.
Thus, in a financial world driven largely by mathematical formulas and computers trading thousands of times a second, a young investor is searching for investments in the most old-fashioned way possible: by reading.
Warren Buffett doesn’t think Mr. Abbott is crazy. The chairman of Berkshire Hathawayhimself spent much of the early 1950s reading every single entry in the thousands of pages of Moody’s manuals, the corporate encyclopedia of that era. He still spends most of his time reading — including the letters to shareholders in companies’ annual reports.
“Over the years, there have been multiple times” when reading the annual letter “has been a factor in my deciding to do something or not to do something,” Mr. Buffett told me this past week when I mentioned Mr. Abbott’s project. Reading a letter was never “the deciding or dominant factor,” he said, “but it was definitely often a factor.”
Not many investors seem willing to do that sort of digging anymore. Timothy Loughran, a finance professor at the University of Notre Dame who studies corporate disclosure, has analyzed computer records for the Securities and Exchange Commission’s filings website. He says only 29 people a day download the average annual report when it comes out. Even General Electric’s annual report was downloaded from GE’s website only 800 times in 2013, according to the company.