5 Tips to Choosing Stocks from Walter J Schloss

"Walter J. Schloss was an American investor, fund manager, and philanthropist. He was a well-regarded value investor, as well as a notable disciple of the Benjamin Graham school of investing. Schloss averaged a 15.3% compound return over the course of four and a half decades. Warren Buffett named him as one of The Superinvestors of Graham-and-Doddsville." - Wikipedia

Walter was known to have owned a hundred stocks at once, focusing on the valuation and to a lesser extent the business economics compared to that of Warren Buffett's concentrated holdings. Walter enjoyed buying companies trading at their new lows. However, because these companies usually have issues, he would look for downside protection. This meant companies with low debt.

While different from Li Lu, Walter would not engage management as he did not believe he was a good judge of character. As he believe management could portray their companies in a brighter light than they actually were in. After all, who would follow a pessimistic CEO? Through the annual reports and proxy statements filed to the SEC and made available on SEC.gov, we can see the statistics of the company and whether or not management owned a fair amount of stock. In addition, you could learn about the company's history. 

The bottom line is to do everything in your power to not lose money. 

Summary of Key Points 

1) Look for opportunities where stocks have made new lows.
2) Avoid companies with large amounts of debt.
3) Review the company's annual reports and proxy and then make a judgment about the company.
4) Unless you are a good judge of people's character, don't talk to management because they could portray the company in a light different from reality.
5) Don't lose money.