“Ben Graham called me on the phone, as I recall in 1969, maybe 1970. He said, ‘I’ve got a copy of your Growth Stock Outlook and I’ve been very intrigued by what you’re doing here. How are you spotting these values?’ I said, ‘Mr., Graham, I’m taking a lot of your own criteria and trying to crank in my own for value relative to growth potential.’ And he said, ‘Well, it’s a very intriguing idea. I think if I were young again, that might be the course I would take. It sort of speeds things up a bit.’”
– Chuck Allmon
Charles W. (“Chuck”) Allmon (Feb 9, 1921 – Oct 17, 2015) published the Growth Stock Outlook (GSO) newsletter from 1965 to 2008. During those 46 years he wrote five different investment newsletters and later managed private portfolios for clients. Allmon was tied for second place among HFD-monitored services for risk-adjusted performance over the 28 year period he was tracked. During this 28 year period he never had a down year. He drew national attention on “Black Monday” in October 1987 when the Dow Jones average dropped 22 percent. Mr. Allmon’s equity fund was the only one in the country to gain ground that day. GSO’s managed accounts were up 30 out of 32 years, including the 2000-2003 downturn. When he retired in 2011 he transferred his accounts to two of his former employees who now run Hendershot Investments.
I never heard of the investor Chuck Allmon before two weeks ago. What is his story?
Chuck was born Feb. 9, 1921, in East Liverpool, Ohio, to Elmer Floyd Allmon and Josephine Tate Allmon. Following graduation from Beaver High School in Beaver, Pennsylvania, and Purdue University, (B.S., Agriculture 1941, Honorary Doctorate, 1994), he took a job with the United Fruit Company, raising bananas in Honduras. During World War II he worked for Firestone Rubber Company in Liberia, producing much-needed rubber for the Allied war effort. It was there that he taught himself the art of photography, using a camera given to him by his mother. Following his freelance career in filmmaking (Polynesia), photography and lecturing, he joined the staff of the National Geographic as an Illustrations Editor.
While on assignment covering the island of Barbados in 1951, Chuck met and eventually married the love of his life, Gwen Drayton Allmon, “the best thing that ever happened to me!” They were a remarkable team for 61 years of marriage, raising two daughters, collaborating on articles for the National Geographic, traveling, and then launching their own business, Growth Stock Outlook (GSO).
The Bozeman Chronicle said Allmon was a voracious reader and energetic, lifelong learner, seeking understanding of global, economic and political issues. His breadth of knowledge informed his process for selecting investment opportunities, which also included looking closely at the character of a company’s leaders, and grilling his teenage daughters and their friends about where they shopped and why.
Allmon was an avid disciple of Benjamin Graham, but added his unique flare in favoring faster-growing companies. But he remained closer to a value investor then a growth investor, and he was extremely disciplined.
According to columnist Mark Hulbert,
Consider Allmon’s response in the late 1980s when the number of stocks satisfying his criteria of value shrunk to near zero. Unlike many of his fellow value advisers, who became “closet” growth stock advisers, Allmon refused to give up his principles to cater to an investment public increasingly bent on turning a quick profit. As a result, he built up a cash position that, with few exceptions, remained at or greater than 75% until he discontinued his letter in 2008.
Though that large cash position didn’t make Allmon very popular in the go-go 1990s, the stellar performance of the few stocks that he continued to recommend, along with the power of compounding, kept him near the top of the Hulbert Financial Digest’s performance ratings.
For instance, Allmon purchased Wal-Mart and FlightSafety in 1971. Both of which were up 2,900% and 3,100% by 1982. We highlight FlightSafety’s founder [HERE], which got purchased by Berkshire Hathaway. By the mid 1980’s Allman had a staff of 15 people, including two CPAs, who spent thousands of hours each year poring over annual reports, balance sheets, and income statements.
The stock Allmon held the longest was Automatic Data Processing (ADP). The stock went into GSO in 1966 at a split adjusted 8 cents per share and remained there until his retirement. The stock showed a gain of 48,665% – a 500 bagger from the original investment.
He loved looking for undiscovered bargains in seemingly unglamorous growth areas. “I always check the companies out, no matter how obscure.” Strangely enough, he was a fundamentalist that was quite contrarian to most fundamentalists of the era. He looked at sales growth first, earnings second and balance sheet third.
Mark Hulbert drew these three investment lessons from Allmon’s investment career:
- Slow and steady really can win. Though Allmon’s conservative approach was well-behind a buy-and-hold strategy at the bull market peaks of March 2000 and October 2007, the bear markets that followed each of those tops pulled the broad market averages back down below the return of Allmon’s portfolio. Ask yourself: Is the thrill of being ahead of the market at bull market peaks enough to overcome the agony of being behind at bear market troughs?
- You don’t need to incur huge amounts of risk to produce stellar long-term returns. This, of course, runs counter to the conventional wisdom, but Allmon’s record shows that it isn’t always true. The HFD calculates that the annualized return of Allmon’s portfolio was 1.7 percentage points less than the broad market averages, and 55% less volatile (or risky). Are 1.7 percentage points of annual performance a fair price to pay to cut risk by more than half? The judgment of modern portfolio theory is “yes,” as judged by his risk-adjusted return being well ahead of the market.
- The third lesson of Allmon’s investment career has to do with the power of compounding. Though Allmon’s returns in any given year were never at the top of the rankings, at the same time he never lost money in any calendar year. As a result, his very conservative strategy continued to propel his portfolio’s worth ever higher, even while the market gyrated wildly above and below.
Here are a few Allmonisms:
“Cut your losses and let your profits fly,”
“The one thing I found is that patience is usually worth more than money,”
“Everybody wants to get rich quick. That’s not the way you do it.”
Several Local Newspaper Articles 1980-1985
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