John McGee is a highly successful but relatively low-profile American value investor known for his purist, no-nonsense approach to managing money. A protégé of T. Rowe Price, McGee later founded his own firm and quietly compiled an extraordinary track record, primarily by following the bedrock principles of Benjamin Graham and Warren Buffett to their logical extremes. His investment philosophy, most famously detailed in an article titled “Confessions of a Value Investor,” centers on a fiercely concentrated portfolio, an exceptionally long-term holding period, and a profound understanding of a handful of businesses. For McGee, investing isn't about predicting market swings; it's about being a patient, disciplined part-owner of excellent companies purchased at a significant discount to their intrinsic value. He represents a powerful, unfiltered version of value investing in action.
McGee’s approach can be distilled into a few core, interconnected principles. These ideas stand in sharp contrast to the strategies followed by most of the investment management industry.
While most financial advisors preach the gospel of diversification, McGee considers it a defense against ignorance. He famously argued that holding more than a dozen stocks means you likely don't know enough about any of them. His strategy involves building a portfolio with as few as five to ten holdings. This intense concentration has two powerful effects:
This is the polar opposite of a typical mutual fund, which might hold hundreds of stocks, ensuring its performance will never stray too far from the market average. McGee doesn't want to be average; he wants to be excellent.
McGee buys a stock with the same mentality as someone buying an entire private company. He isn't interested in what the stock price will do next week or next quarter. He is interested in the long-term earning power of the underlying business. This means focusing on:
By thinking like an owner, he can patiently hold through market downturns, knowing that the business's intrinsic value remains intact.
Perhaps McGee's greatest strength is his incredible patience. He likens investing to baseball's Ted Williams, who famously divided the strike zone into 77 baseballs and only swung at pitches in his “sweet spot.” McGee is willing to hold large amounts of cash for years if he cannot find an investment that meets his strict criteria within his circle of competence. He completely ignores the pressure to always “be invested.” He waits for Mr. Market, in a fit of panic or pessimism, to serve up a fat pitch—an outstanding business at a ridiculously cheap price. This discipline is what separates true investors from speculators.
While running a five-stock portfolio might be too nerve-wracking for most, McGee's philosophy offers timeless wisdom for any investor.
John McGee is a crucial figure for value investors because he is a purist. He reminds us that the principles laid out by Graham and perfected by Buffett are not just academic theories; they are a practical, albeit demanding, blueprint for building serious wealth. In a world obsessed with speed, complexity, and short-term results, McGee’s simple, patient, and concentrated approach is a powerful antidote and an enduring source of inspiration.