9: Robert Hagstrom on The Money Mind

Get to Know Robert

After growing up in Nashville, TN, Robert went to school at Villanova University for his undergrad and graduate degrees in Political Science, where he also pursued writing for local news outlets and publications. After making a deal with one publisher in Philadelphia to sell ads for their paper in exchange for writing a column, he found himself pitching the manager of Legg Mason Wood Walker and members of the New York Stock Exchange. That manager was not interested in an advertisement, but offered him a job selling stocks.

Reframing His Outlook on Stocks

After accepting this new role and beginning his 3-week training, Robert thought he made a terrible mistake—he had been a liberal arts major and had zero experience or knowledge in finance and accounting. The night before his final day of training, he was given the Berkshire Hathaway Annual Report, written by Warren Buffett, neither of which he had ever heard of before. While he had spent the previous few weeks looking at this new industry as data points and numbers, Warren Buffet highlighted the value beyond the numbers: The management, the people that ran the companies, the businesses, and the products and services. 

A light bulb went off for Robert. All these numbers that were on balance sheets and income statements were actually businesses that he could relate to and understand. This made the process of getting started easier for him to understand being someone who was not as knowledgeable in the industry.

Soon after, Robert moved to the “buy side” of the stock market, where he worked in the trust department at a local bank, joined a small investment advisory, and earned his CFA.

Sharing His Thoughts & Expertise through Writing

Robert’s love of writing continued after his career took him into the investing world. Robert’s love for reading and writing in his spare time has led to the publication of ten books. In this episode, Robert highlights a couple of his books that I believe every investor should pick up and read!

The Warren Buffett Way

While publishers were interested in a book by Warren Buffett, Robert knew he wanted to write a book about him. It took quite a bit of pitching the book before he landed a deal, but once he did, he requested copyright permission from Warren Buffett to include quotes from his annual reports in the book. Initially, Robert was told that he could not have it just yet; which to Robert meant that permission was coming - and it did!

Not long before it was published, Robert got copyright permission for The Warren Buffett Way. With Warren Buffett, Peter Lynch, and Forbes endorsing it, the book became a NY Times Best Seller. Robert later met Warren Buffett in person, who invited him to the Berkshire Hathaway Annual meeting. Since then they have kept in touch, leading Robert to write his newest book, Warren Buffett: Inside the Money Mind.

Warren Buffett: Inside the Ultimate Money Mind

At the 2017 Annual Meeting, Warren Buffett was asked about the position of allocation decisions when he was no longer doing it. His response was that the person to take on that position would need to have a money mind—the understanding of the rational allocation of capital and how to think independently. This was the first time Robert had heard that phrase used by Warren Buffett.

What Robert had spent most of his life doing was getting the “facts” right, but not the philosophical aspects of being a good investor. That is where the concept of his book Warren Buffett: Inside the Ultimate Money Mind was born. What qualities does someone with a money mind actually have? It is the understanding that risk is the variance of return and price is different from value and doesn’t always equate to it—enter value investing.

Investing: The Last Liberal Art

Robert published a book at the beginning of a bear market entitled Latticework: The New Investing. The book did not sell, so he went back to the drawing board. They retitled it to Investing: The Last Liberal Art and republished it after the bear market was over. Under the new title, it began to sell!

Good Analysts Are Good Detectives

Along with the concepts of this book, Robert believes in the value of liberal arts and how they can be applied to finance and investing. If you were to read literature as an investor, what would you read? Simply put, the mysteries solved by Auguste Dupin, Sherlock Holmes, and Father Brown are a great place to start. If it is a good mystery, they will give you all the facts upfront, then it is up to you to figure it out. That is what investing is and how it works.

The Warren Buffett Portfolio

While The Warren Buffett Way focused primarily on stock selection, Robert wrote another book titled The Warren Buffett Portfolio focusing on portfolio management. Warren Buffett owns very few stocks, and he holds him for a long period of time—low turnover, concentrated. 

The academics at Yale University got on his side and did a study on similar stats and facts, noting that high Active Share is defined as how different your portfolio is from the underlying index and then they further noted that among the high Active Share portfolios that performed the best, it was those having low turnover.

But the problem is how do you explain to a client that your long term returns are good, but you are only outperforming 50% of the time? Finding a client who understands it all and trusts your strategy is a rare find.

Robert’s Advice to Younger Generations

When speaking to college students, first and foremost, Robert likes to acknowledge how hard they have worked to get where they are; with that in mind, he encourages them to never stop learning. It is easy to become complacent in searching for knowledge after removing yourself from the educational system, yet you can grow and do so much more if you continue being curious and never stop looking for understanding all around you.  

Meet Robert

Robert is Chief Investment Officer of EquityCompass Investment Management, LLC and Senior Portfolio Manager of the Global Leaders Portfolio. He joined EquityCompass in April 2014 and

launched the Global Leaders Portfolio in July 2014. Robert was appointed Chief Investment Officer in March 2019. 

Robert has more than 30 years of investment experience. Prior to joining EquityCompass, he was Chief Investment Strategist at Legg Mason Investment Counsel, and before that, the Portfolio Manager of the Growth Equity Strategy at Legg Mason Capital Management for 14 years where he managed $7 billion in assets. Robert received an “Honorable Mention” recognition in Morningstar’s Domestic-Stock Fund Manager of the Year in 2007 while with Legg Mason.

Robert is the author of ten investment books including The New York Times Best Seller, The Warren Buffett Way. It is widely considered to be the definitive book on the investment approach and strategies of Warren Buffett. The book has sold over one million copies worldwide and is translated into 17 foreign languages. In addition, Robert wrote Investing: The Last Liberal Art, a multi discipline examination of investing and decision making. His latest book, published in 2021, is Warren Buffett: Inside the Ultimate Money Mind.

Robert earned his Bachelor’s and Master’s of Arts degrees from Villanova University. He is a Chartered Financial Analyst, a member of the CFA Institute, and the CFA Society of Philadelphia. Robert is also a member of the Global Interdependence Center.

Mentioned in this Episode:

The Warren Buffett Way

Warren Buffett: Inside the Ultimate Money Mind

Investing: The Last Liberal Art

The Warren Buffett Portfolio 

Scott's Interview with Robert Hagstrom

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