Growing Rich - Arabictrader.com

GROWING RICH WITH GROWTH STOCKS
a subsidiary of Lincoln National and had been around since 1933. In
1968, they were sold to the International House of Pancakes, during
which time they floundered in mediocrity. “The funds had become
true orphans because the people in charge had all since left the company,”
Yacktman explains. “In the ten years that Lincoln National
ran Selected American, assets went from $210 million down to $76
million by the end of 1982.” The fund had eight outside and two inside
directors, who had privately reached an agreement that it was time
to change the fund’s investment adviser. They interviewed three potential
candidates, including Vincent Chesley, Stein Roe, and Kemper
Financial. “One major advantage we had over the competition was
that these funds were very big for us. They were small potatoes to
the others,” Yacktman surmises. “We were also willing to compensate
the former manager by purchasing some computer equipment and
software from them. The bottom line is we were selected to manage
the funds the day the market bottomed, Friday, August 13, 1982. We
officially started running them on January 1, 1983.”
Bill Goldstein, Yacktman’s boss, took over Selected Special, a smallcap
fund, and gave Yacktman Selected American to run. “He said it
was made for me,” Yacktman recalls. “It was clearly my style. At the
time, it was a balanced fund. I didn’t like that aspect of it, but I loved
the idea of managing my own fund. It was what I really wanted to
do. When I left Stein Roe, I felt it was an opportunity for me to prove
myself. Either I had it in me to manage money on my own, or I didn’t.
My salary had always been secondary. Actually, I took a pay cut when
I left Stein Roe, but the opportunity was there. I didn’t realize how
big the opportunity would turn out to be.”
LIFE AT SELECTED AMERICAN
Six months after taking over Selected American, Yacktman convinced
the board of directors that balanced funds were a thing of the
past. “I really felt it was a cafeteria-style investment environment,”
he says. “People wanted either an equity or a fixed-income fund, and
I didn’t like bonds to begin with. The directors bought my argument.
I guess they figured they had nothing to lose. I mean, this fund was
in the bottom decile of performance at the time and assets had run
down to almost nothing. At my first directors’ meeting, I remember
walking in, and I’m sure their mouths were agape, because I told them
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