Mutual Funds > Zweig on Funds
The Best Investor You've Never Heard Of
June, 2000

By Jason Zweig
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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.