Charles de Vaulx Shares His Investment Philosophy

It’s a pleasure to share with you the following wide-ranging conversation with superinvestor Charles de Vaulx. He joined International Value Advisers, LLC (IVA) in May 2008 as a partner and portfolio manager, and serves as chief investment officer, partner, and portfolio manager.

Until March 2007, Charles was portfolio manager of the First Eagle Global, Overseas, U.S. Value, Gold and Variable Funds – together with a number of separately managed institutional accounts. He was solely responsible for management of the Sofire Fund when it won an Absolute Return Award for “Fund of the Year” in the global equity category in 2005 and 2006. In addition to sharing Morningstar’s “International Stock Manager of the Year” Award in 2001 with his co-manager, Charles was runner-up for the same award in 2006. From 2000 to 2004, Charles was co-portfolio manager of the First Eagle Funds. He was named associate portfolio manager in 1996. In 1987, he joined the SoGen Funds, the predecessor to the First Eagle Funds, as a securities analyst. He began his career at Societe Generale Bank as a credit analyst in 1985. Charles graduated from the Ecole Superieure de Commerce de Rouen in France and holds the French equivalent of a Master’s degree in finance.

MOI Global: It’s a pleasure to have with us Charles de Vaulx, Chief Investment Officer at International Value Advisers. Charles, welcome.

Charles de Vaulx: Thank you.

MOI: How did you become interested in investing?

de Vaulx: I became interested at an early age. My first investment was a gold coin in late 1975 at the age of fourteen years old. My first stock was in 1976, after what had been two very difficult years following the 1973-’74 oil crisis and recession. At that time I was in Paris, but I had just been there for a few years.

Prior to that, from age five to twelve-and-a-half, I was living with my parents in Johannesburg, South Africa, and before that I was born and spent five years in Morocco. My father worked in the oil industry with Total. I think that my time in South Africa and my exposure to business through my father helped me get interested as a child in understanding businesses. Even before the oil crisis of ’73-’74, there were major ideological challenges. Communism was still a major threat worldwide. We tend to forget.

Both of my grandfathers had been in the military. It occurred to me at an early age, perhaps at the age of 9, that going forward the real wars may no longer be military, but more economic wars, ideological wars and, hence, I felt that I needed to understand money, industry and finance as opposed to doing what my grandfathers had done and go into the military.

As a young child in Morocco and later traveling with my family through Southern Africa, I was exposed to poverty growing up, which scared me. It impressed upon me the importance of saving so that you can at least have the essentials — shelter, clothing, food. These experiences made me realize that nothing is a given.

After I bought my gold coin and my first stock my interest only grew. I read the financial newspapers each day and during my lunch breaks at school I would sometimes take a quick subway ride to the Paris Bourse. Much later, in 1983, as a part of my studies in France, I was able to get a six-month internship in New York City in 1983. I was twenty-one years old at the time, and three out of the six months I spent with Jean-Marie Eveillard, with whom I worked subsequently for a long time. Jean Marie taught me what I knew nothing of at the time, which is value investing – the concept that investing is not necessarily about finding growth stocks, and that markets can be inefficient enough sometimes that some stocks can trade at times at a 30% or 40% or 50% discount to what the companies are actually worth.

MOI: How did working with Jean-Marie Eveillard influence you? Can you share with us perhaps the single biggest lesson from working with Jean-Marie?

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