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The Davis Dynasty: 50 Years of Successful Investing on Wall Street
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23 of 24 people found the following review helpful
VINE VOICEon February 27, 2002
I personally don't care for dry investment books. I read for entertainment. This book provides a great combination as it is a biography of a family steeped in money management and also gives tips of how they were able to grow their fortune.
The book traces the investment history of Shelby Davis to his son to his grandsons. Shelby had family money through his wife and starts investing shortly after the crash in '29. Like many people, I assumed the market has been a somewhat continual climb with some setbacks. This books traces the history showing the many periods of lackluster stock value growth and how most Americans shunned the stock market for bonds. Quite a difference from today.
The original Shelby was a miserly value investor who never spent an extra dime. His investment hits were insurance stocks when no one liked that industry and some prudent investments in Japan, also mainly in the insurance industry. By leaving these investments to compound for years, Shelby built a great fortune. But the hidden engine behind this vast growth was the use of margin to leverage his returns. The original Shelby eventually grew his fortune to over a billion dollars in value.
Shelby's son Shelby did not work with his father until late in his life but eventually became a money manager of some renown also. His philosophy was similar but different and his large money winners tended to be from other industries. The book ends with the sons of Shelby Jr. taking over their father's money management firm and establishing their own identity.
Along this 70 year history, you will learn about the markets and the different stages of development over the years. A significant amount of time is spent in the 60s and 70s as both of the Shelby's were investing at that time. I strongly recommend this book if you have interest in the market and its history.
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19 of 20 people found the following review helpful
on March 3, 2008
This book is about The Davis strategy - the result of five decades of trial, error, and refinement, that worked its way through father, son and grandsons, and each generation tweaked it and tuned it to fit the era. The 10 basic tenets remain the same: avoid cheap stocks; avoid expensive stocks; buy moderately priced stocks in companies that grow moderately fast; wait until the price is right; don't fight progress; invest in a theme; let your winners ride; bet on superior management; ignore the rear-view mirror; stay the course.

This book is both a biography and the analytical work devoted to the stock market. If you like such a blend, I would recommend the books by Roger Lowenstein: "Buffett: The Making of an American Capitalist", "When Genius Failed: The Rise and Fall of Long-Term Capital Management" and "While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis". The books by Roger Lowenstein are much better than "The Davis Dynasty" in terms of the depths of the analysis, as well as when it comes to liveliness and variety.

In addition to this book, I can also recommend my favorite title on investing "The Only Three Questions That Count: Investing by Knowing What Others Don't" by Kenneth L. Fisher.
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12 of 13 people found the following review helpful
on February 15, 2007
This is one of the better investment books on the history of post-WWII stock investing. While there are a number of absolute classic books on the 1920s and earlier periods (Lefevre's "Remininscenses of a Stock Operator", Galbraith's "The Great Crash", Brooks's "Once in Golconda", to name just a few), there aren't as many great books on recent history. This is one of them, however.

The Davis family, starting with Shelby Collum, is used by the author as a vehicle to traverse the history of the stock market from WWII through the late 1990s. Followers of mutual fund investing in the past 25-30 years are probably more familiar with Shelby Davis the younger, than with his father Shelby Collum. But it was the elder Shelby that made the family fortune. His is one of the great fortunes ever created strictly through long term investment and is a story of buying extreme value and holding for very long time periods. It's also about venturing into uncharted waters -- like being one of the first to invest in Japan.

This theme is carried forward to the story of his son, the well-known former portfolio manager of New York Venture Fund. Shelby the younger came of age in the go-go sixties and picked up some bad habits. The savage bear markets that followed chastened him and forced him to revert to a style of investing closer to his father's in the mid 1970s. The tensions between them created a sort of competition with the son posting a tremendous record with his mutual fund vehicle, New York Venture.

The relationship between father and son would be best described as "semi-estrangement." It took Shelby's sons, Andrew and, particularly, Chris to reconcile their father and grandfather's differences. The human story is interesting, and the elder Shelby was quite a character. I found the chapter on Chris's "apprenticeship" with his grandfather fascinating -- perhaps the best part of the book. In short, Shelby the elder is getting old and wants to retire and turn his portfolio over to a younger generation for management, but because of the bad feelings he doesn't know how to approach his son. And it's clear that he greatly admires the record his son has build with NY Venture. So he talks grandson Chris Davis (now the co-manager of NY Venture and Selected American Shares) into inventorying his portfolio. Chris then brings his father into the picture and the two of them work long hours reading through the 5 decades of trades and holdings. The portfolio at that time was close to $1 billion.

The story ends with the younger Shelby's semi-retirement and turning the reins over to sons Andrew and Chris, and Ken Feinberg, who continue with this style of investing. The mutual funds and separate accounts run by the Davises typically have portfolio turnover rates less than 20%, often less than 5%. This means they buy and hold, and hold, and hold. However, it's the price they pay for stocks that really juices their returns. The pigeonhole mentality at mutual fund rating agencies like Morningstar don't adequately describe Davis funds because of this. The Davises buy deep value, but after a stock recovers from whatever temporary trauma caused the bargain price, they continue to hold as long as the company meets their growth expectations. So Morningstar, for example, will call them a "blend" fund, which seems to say absolutely nothing about such a distinctive methodology as the one the Davises follow. This book is an elucidation of the emotional discipline and intellectual process behind this style of investment. Both the book and the investment style are highly recommended by this reader.
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8 of 9 people found the following review helpful
John Rothchild has written a fascinating biography of one of Wall Street's most successful and least-known investors, Shelby Davis, who turned a $50,000 initial investment in 1947 into $900 million, almost exclusively by buying and selling insurance stocks. Part character study, part Wall Street history, Rothchild's book reads like a novel, with an accessible and witty narrative. Of special note is the concise summary of Davis' investment strategy, which rivals Buffettology in its simplicity and common sense. In Rothchild's hands, Davis' life becomes a fun read, no matter what your business interests, and we from (..)recommend this book to all curious readers.
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8 of 10 people found the following review helpful
on October 27, 2001
While this is not a "how to" book it certainly is "why to" book. It's a look at remarkable family that gives anyone who has never invested in the stock market a perfectly good reason why they should! Patience and long term results are a philosophy that has worked well for them over the years. It's a look at a concept and philosophy handed down by the patriarch of the family that wealth should not be handed down, but earned. Spanning 4 generations, Rothchild gives the reader a remarkable insight into a family that works hard and plays hard. Even with this success the family has given back through many philanthropic endeavers including millions to the United World College. The college, with 10 campus' world-wide endeavers to bring students of different cultures and backgrounds together to foster understanding of each other in a world that desperately needs it.
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3 of 3 people found the following review helpful
on August 14, 2009
This book is a biography of the Davis family comprising the father, son, and two grandchildren, who were all involved in the money management business. The philosophy of buying stocks at reasonable prices and holding them for years has been around for decades. Even though this philosophy worked for Shelby Davis, the father, who turned $50,000 into $900 million, today, few investors have this kind of patience and instead, employ all kinds of other short-term schemes. I found it very interesting when the son strayed away from his father's philosophy in the 1960s, but when the bear market put him in place, he readjusted his investment style to be closer to his father's. When the father wanted to retire, he asked his grandson to take over the management of his portfolio because he did not have the best relationship with his son.

This book is a representation that buying value and holding for long periods of time works. I thoroughly enjoyed reading this book.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market
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2 of 2 people found the following review helpful
on May 17, 2013
What's the difference between Warren Buffett and The Davis family? The former's compounding at 23 percent annually for over 50 years has brought him the kingdom and the princess many times over, while the latter's equivalent number - spread over 60 years and three generations - merely makes them heroes of Stockpickerville. Admittedly Buffett has "done more" with his 23 percent annual clip, but as far as long duration stock picking goes, the feats are equally impressive.

"Throughout the market saga and the family saga, Davis's stock-picking teqniques have produced many happy returns...". The quote from Peter Lynch, writer of the foreword and a Davis-investing devotee, aptly catches the gist of this 2001 book by John Rotchild. The Davis Dynasty is as much a family chronicle as it is a 60-year investment journey. As a fellow investor, I find the fact that there is a "Davis dynasty" absolutely fascinating in the first place; the stock picking ability did not rest in one person for a very long time but in three generations for an extraordinarily long time. It is without precedent, even though the third generation has fully to prove themselves over a long-enough time-period.

For the majority of us who are familiar with the Davis family, two words immediately come to mind: insurance companies. Shelby Davis started post WWII with $50,000 from his wife's family and ended up with a total estate worth $900mn in 1994, largely via buying and holding well-run insurance companies. The dig-where-you-stand method of investing later popularized by Lynch, has its true father in Davis. The life-long love affair with insurance stocks emanated from his five year experience as a functionary in the NY State insurance department. A "Sliding Door" observation: would the "Davis Dynasty" have happened had Shelby accepted the offer to work for the utility department in 1942? Only very late in his investment career did he branch out of insurance stocks. Up to this day, his son, also named Shelby, and the two grandsons now running the Davis Funds, have not strayed far away, mainly owning financial stocks and adjacent businesses.

John Rotchild's novelist-type writing style - which is on full display in One Up On Wall Street which he co-authored with Peter Lynch - can also be seen here. Not many books within the business book space can be described as page-turners, but this one is. Accolades must also be handed out to Rotchild et al. for the amount of research work going into this book. Considering that Shelby Davis Sr. left no investment diaries, records or notes of any kind, countless hours must have been spent digging up numbers and events.

The weak spots in the book have more to do with the lack of detail around the handcraft and the smallish space devoted to the second generation. A substantial portion of the $900mn was gained in the latter part of Davis's life, when he finally had handed over most investments to his son. To some extent, these two areas go hand in hand, and are only slightly improved by the last two chapters covering some of the principles behind the Davis investment philosophy. For somebody with an appetite for the Davis family's stock picking teqniques, I highly recommend visiting the Davis Fund's own website.

For a contemporary set of circumstances, the read about the mid-40s "balm and sweet simplicity of no percentage interest rates" (J.M. Keynes) is very enlightening, perhaps also a ghost's whisper of what's to come in the 2010s. War bonds had created "a sea of money" which lenders would soon realize logically required them to demand higher interest rates, not lower. The following bond malaise is well chronicled. The challenge today as an equity investor, foreseeing a similar large scale rotation into equities? In 1946 at the trough of long term interest rates, the equity market served up 9 times earnings, 1 time BV and 5 percent dividend yield. Not exactly the valuation menu on offer today with the Dow Jones at all-time highs.

This is a review by investingbythebooks.com
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2 of 2 people found the following review helpful
on May 30, 2012
Author John Rothchild has a very interesting style, combining an historical details and flavor of each time period with interesting details of the Davis family.

For example, this description of the start to Davis's day gives flavor to Davis Senior's character circa 1948. At this point Davis was head of the slightly-off Wall Street firm Shelby Cullom Davis & Co.

"The resident stock picker emerged from his bedroom at 6:00 A.M., cooked his own breakfast on a hot plate in the bathroom, ate while he dressed without noticing what he was wearing, grabbed his briefcase, and called for Kathryn to drive him to the train station. He caught the 7:00 A.M. commuter from Tarrytown to New York. His neighbors opted for the 8:00 A.M. club car, which gave them more time to sleep and a cushier ride. Davis preferred an earlier start and nobody to bother him while he read the Wall Street Journal. He also liked getting a jump on the Wall Street crowd. The lower fare at 7:00 A.M. was a bonus."

Regarding Davis's partner: "Davis allowed Brokaw to stay on as his partner, at least temporarily, but several months into the new arrangement, Brokaw dissolved the partnership by drowning in the Atlantic Ocean."

The family side of the book as interesting as the investing insights and lessons. I loved the book.
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2 of 2 people found the following review helpful
on June 3, 2011
Great book, I downloaded to my kindle. I'm a big fan of bio's on real estate developers and value investors. Shelby Sr and Jr are incredible models to follow and the book goes into their methodology. Like all great investors, they adhere to a strict value investor model like Graham, Buffett, Klarman, Greenblatt and others. I am really inspired by Davis (Sr) and love the principles he preached and lived. What a role model, I can relate as if I knew the man. My grandfather would always say, "You need to save that money" and towards the end of his life, he would say, "You need to invest that money." I can imagine Davis (Sr) saying the second part. This is both entertaining and full of wisdom. High marks!!!
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1 of 1 people found the following review helpful
on November 12, 2007
This book is listed as Elementary Reading for the [...] Hidden Gems Newsletter. It provides great historical reading about the Davis family. Before the reading the book I had no idea who the Davis family was. I did not even realize we have the Davis Fund as a choice in our 401k at work. The fund has proven returns and been around for years. This was a great book to read for any beginning investor.
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