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David Winters, Wintergreen

A successful entrepreneur and world-class investor, Winters achieved both by taking an eclectic approach.

Bridget B. Hughes, 08/04/2008

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David Winters always liked trains as a boy, so you might say it was his childhood pastime that led him to Richmond, Fredericksburg & Potomac Railroad dividend obligations early in his career at Mutual Series. He remembers seeing the train once as a kid. But something bigger caught his attention as an investor. Reading the company's annual report, Winters found that RF&P had no debt and lots of cash. What really clinched it for him, though, was its 350 acres in Alexandria, Va.--on the books at 1830s prices. (The railroad was chartered in 1834.) Winters says a sum-of-the-parts analysis showed the company was trading at a "massive discount."

His experience with RF&P didn't stop there. Years later, in 1990, CSX CSX embarked on a takeover of the company. Winters, as shareholder activist, worked to get a better price for RF&P investors.

Learning from Legends
Winters still likes the railroad. Train pictures and models populate his office in Mountain Lakes, N.J., and last summer, he vacationed by Amtrak. He still likes asset plays, too: Consider that the fund he started and manages, Wintergreen Fund WGRNX, invests in Consolidated- Tomoka Land CTO, which has thousands of acres in east-central Florida on the books at dated prices. And he still takes on corporate managements; as a large shareholder of Consolidated-Tomoka, he's been forceful and persistent in his requests of that company's management and board of directors.

Winters hasn't changed his investment approach over the years either. He wants to limit downside risk but provide lots of upside, and he searches for passionate, competent management. His quest for the "trifecta"--a good business that can grow over time, is run by a good management team, and is trading at a discount to its value--has been a constant.

That approach might sound simple, but it's hardly easy, especially considering that Winters' investment universe is the world and Wintergreen's portfolio is concentrated. One of the things that sets him apart from other managers is a willingness to search far and wide in his pursuits--something he learned when he started his career in 1987 at Mutual Series working under value legends Max Heine and Michael Price.

"One of the keys to security analysis that I learned from Michael was to look at debt and equity investing as a continuum, and to look at the company from various perspectives of what could be rather than just what was there in front of us," Winters says. "That search for possibilities led quite naturally to a host of investment techniques and tools including activism, bankruptcy, convertibles, and distress."PAGEBREAK

Through the years, Winters has thus tended to build more-eclectic portfolios. Never have they looked much like any market index or the vast majority of other portfolios. In the late 1990s and early 2000s, for example, his training led him to play the tobacco-company consolidations around the world, even as many investors were running away from tobacco on fears of big legal settlements. The early 2000s, too, brought opportunities in distressed investing, or investments in firms going through bankruptcy. For example, Winters' charge at the time, Mutual Discovery TEDIX, had invested in the bonds of bankrupt British cable firm NTL.

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