CHAPTER 29 James Gipson of the Clipper Fund. On the tenth anniversary of the Clipper Fund, in 1994, I asked James H. Gipson, the manager, why his fund—unlike so many other contrarian funds—had been so successful. “We do a more diligent job of analyzing companies,” he answered. | CCC-Boroson 5 185-242 8 28 01 1 29 PM Page 2 CHAPTER 29 James Gipson of the Clipper Fund On the tenth anniversary of the Clipper Fund in 1994 I asked James H. Gipson the manager why his fund unlike so many other contrarian funds had been so successful. We do a more diligent job of analyzing companies he answered. Also other people say they re contrarians but they don t invest that way. This was before the ascension of Bill Miller the Legg Mason money manager Legg Mason Value Trust who committed heresy by purchasing a variety of Internet stocks. Questions and Answers Q. Do you look for a catalyst that will revive a stock that s out of favor . In some cases you can find a catalyst. But that s too clever by half. Most of the time we don t try to be that clever. One of the hardest things to do is to know what stock will go up and when. You never know. Still 75 percent to 80 percent of our stocks work out. 205 CCC-Boroson 5 185-242 8 28 01 1 29 PM Page 2 206 JAMES GIPSON OF THE CLIPPER FUND Q. What else do you do differently . We concentrate to a greater degree. We have only 30-odd stocks. That s very unusual. If you re intellectually honest you know that your top 10 best ideas will do better than your 40 to 50 best ideas. If you have the courage of your convictions you feel that your best ideas will do best. Gibson Michael Sandler and Bruce Veace the managers of Clipper were named Morningstar s stock fund managers of the year for 2000. As Morningstar noted by sticking with seemingly cheap stocks and retreating to bonds and cash when stocks just didn t look attractive the fund trailed the Standard Poor s 500 for four consecutive years. The year 1999 was the worst As investors sought big tech stocks the S P 500 dominated by such stocks rose 20 percent Clipper fell by 2 percent. The year 2000 saw the righteous rewarded Clipper rose 35 percent the S P 500 went down 10 percent. See Figure . The three men look for stocks with powerful franchises stocks that are .
