Rosenfield can still recall the first stocks he bought for his
own account--right after the crash of 1929. "In the early days I
was doing too much short-term investing," he says. "I'd buy and
sell stocks in 30, 60, 90 days: Studebaker, Dodge, Nash Motors. I
thought I could make real money doing that, but I was wrong. I
didn't go broke, but I got badly bent. Buying for a short period
is always going to hurt you in the end."
That's a lesson he's never wavered from--and one that has defined
his strategy for Grinnell from the very start. "I figured
government bonds wouldn't get the college anyplace," says
Rosenfield. So he started looking for "good common stocks we
could own for the long term."
Before long he had help. In 1967, some friends introduced him to
Warren Buffett. In those days, Buffett's private partnerships,
which had beaten the market by a vast margin for 10 years,
totaled less than $75 million. Virtually no one outside of Omaha
had ever heard of him--but, recalls Rosenfield, "I could see what
a fine mind he had, and I was immediately attracted to him." The
two men bonded at a speech the Rev. Martin Luther King Jr. gave
at Grinnell. "We hit it off immediately," confirms Buffett. "Joe
is an extraordinarily generous and smart man. I'd never have
wanted to replace my real father--but if after my dad's death I
could have adopted Joe as my father, I would have." Rosenfield
promptly invested in his new buddy's company, buying 300 shares
of Berkshire Hathaway for Grinnell for $5,252. In 1968, Buffett
joined Grinnell's board.
That was the same year that another Grinnell trustee, Robert
Noyce, called Rosenfield to tell him about a new company he was
starting. Noyce had been kicked out of Grinnell in his junior
year for stealing a 25-pound pig from a nearby farm and roasting
it at a campus luau; his physics professor, who felt Noyce was
his best student ever, got the expulsion reduced to a
one-semester suspension. Noyce had never forgotten the favor,
which was why he was offering the college a stake in his
start-up, NM Electronics. Was Rosenfield interested? "The college
wants to buy all the stock that you're willing to let us have,"
he told Noyce instantly.
Grinnell's endowment put up $100,000, while Rosenfield and
another trustee each kicked in $100,000 more, enabling the school
to supply 10% of the $3 million in venture capital that Noyce and
his sidekicks, Gordon Moore and Andrew Grove, raised for the
company that they soon renamed Intel. By 1974, three years after
Intel went public, Grinnell's endowment had more than doubled to
$27 million--even as the stock market lost 40% of its value.
Meanwhile, Rosenfield was keeping his eyes, and his mind, wide
open. In 1976, Rosenfield heard from Buffett that a TV station,
wdtn of Dayton, was for sale. Endowments rarely control private
companies, but Rosenfield thinks like a businessman, not a
bureaucrat. He grabbed wdtn for Grinnell at just $12.9 million,
or a mere 2 1/2 times revenues at a time when TV stations were
selling for three to four times revenues.
Next, from 1978 through 1981, on Buffett's suggestion, Rosenfield
put $10 million, or a third of the entire endowment, into the
Sequoia Fund. And in 1989, Rosenfield bought a $25 million stake
in Freddie Mac, the Federal Home Loan Mortgage Corporation.
Today, nearly two-thirds of Grinnell's endowment--more than $600
million--is in Sequoia. That's one of the largest investments ever
amassed in any mutual fund by a single shareholder.
Between 1977 and 1997, Sequoia outperformed 94% of all
diversified U.S. stock funds and beat the S&P 500 by 2.7
percentage points annually. Meanwhile, Freddie Mac boomed through
the 1990s. Though Rosenfield has sold much of Grinnell's stake,
the school has made roughly $130 million on it.