GEICO: Growth vs. Value: A Lesson from the InsurerVW Staff
“In 1948, we made our GEICO investment and from then on, we seemed to be very brilliant people.” – Benjamin Graham, 1976
What can GEICO teach us about “value” versus “growth” investing? Plenty. Just ask David Rolfe, Chief Investment Officer at Wedgewood Partners. In fact, David has recently shared with us many great insights from his study of GEICO, the “growth company” that – surprisingly – made the “value investing” careers of both Benjamin Graham and Warren Buffett. As David explains, both Benjamin Graham and Warren Buffett owe a substantial part of their wealth and public reputations – and deserved accolades – to a singular great “growth company,” the Government Employees Insurance Company (GEICO).
My conversation with David Rolfe touched on many aspects important to investors in growing, wide-moat companies, on some of which I have written here. I’m pleased to share below David’s very instructive insights on GEICO. The full video of my conversation with David Rolfe, as well as David’s 21-page paper on GEICO, is available in The Manual of Ideas Members Area.
David Rolfe on What Investors Can Learn from GEICO
Says David Rolfe:
“It’s a story that we’ve liked to tell when we’ve met with clients and prospective clients over the years because the long history of GEICO is ripe with examples for growth investors and value investors. The company was started in 1937 with about $100,000 in seed capital. Interestingly enough, in 1948 Benjamin Graham, again to coin a phrase, coin of the realm of late, he broke bad and he broke his rules, and he put 25% of his investment partnership in a privately held company.
Fate would have it that the SEC ultimately ruled to allow that purchase because he was an advisor buying an insurance company and there’s some regulations, and rules, and limitations. It allowed for the first publicly traded shares of GEICO, and GEICO soared, and it soared.
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