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Forbes Columnist Brett Arends: The Next Warren Buffett Is Building a Fortune

By John Morgan   |   Monday, 23 Jun 2014 12:13 PM

The next Warren Buffett may be a young college dropout from Salt Lake City who is already amassing a fortune for investors, according to Forbes columnist and author-journalist Brett Arends.

Arends said Allan Mecham has been beating his competitors, and the indexes, since launching his investment firm, Arlington Value Management, in 1999.

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“For the past 30 years everyone on Wall Street has been looking for the Holy Grail of money managers, the ‘next Warren Buffett.’ It’s always dangerous to make these kinds of predictions, but if Allan Mecham, currently just in his mid-30s, isn’t the genuine article, he’s doing a remarkably good impression of it,” Arends wrote.

Here’s how $100 invested with Mecham did from Jan. 1, 2000, through Jan. 1, 2014, vs. Buffett and the overall U.S. stock market: Mecham, $1,100; Buffett’s Berkshire Hathaway, $330; Vanguard Total U.S. Stock Market Fund, $178.

The catch is that Mecham’s Arlington Value, which has $470 million in assets under management, is a private investment fund. It is only open to institutional money managers and qualified private investors.

But Arends writes in Forbes that there are certain surprising principles Mecham follows that individual investors can emulate. He describes Mecham as “publicity shy and reluctant to talk.”

“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,” Arends wrote. “Mecham doesn’t even like to build spreadsheets. He doesn’t care about the next quarter, he cares about the next 10 years. 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.”

Mecham’s investing rules sound a bit like Buffett’s. Some of them, according to Arlington, include: we view stock as ownership in a business; Arlington strives to be conservative, and invest with a margin of safety; we exercise patience and discipline to only invest in exceptional opportunities; we focus on businesses we thoroughly understand; Arlington focuses on companies with staying power. We look for long-term durability and low rates of change; and we only invest when the price is attractive, which provides both a margin of safety and favorable prospective returns.

Arlington is private and structured like a hedge fund. Stockzoa, a site that follows such investment managers through their 13F SEC filings, reported some of Arlington’s investments in the first quarter included familiar names like Bank of America, Berkshire Hathaway and IBM.

Stockzoa also listed some less familiar Arlington investments such as Copart, Leucadia National and Deswell Industries.

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