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Ralph Wanger

Ralph Wanger was born in 1933 in Chicago. He studied at the Massachusetts Institute of Technology and graduated in 1955 with a bachelor and a master’s degree. He began working in the insurance business before changing to investments when he accepted a position with the Chicago firm of Harris Associates in 1960. He worked in analyst and portfolio management roles until the Acorn Fund was founded in 1977. Wanger then became the president and portfolio manager for Acorn, and held these positions until he retired in 2003. Wanger achieved very successful results with Acorn. The annualized return for the fund was 16.3% under his management, while the S&P 500 Index was only 12.1%. Acorn was one of the best-performing small-cap growth funds in the United States between 1970 and 1988.

At Acorn Wanger used an investment style that focused on the long-term investment in small companies that had financial strength, an easy-to-understand business model and an entrepreneurial management team. He felt that these companies would best benefit from macroeconomics and once said, "If you're looking for a home run – a great investment for five years or ten years or more – then the only way to beat this enormous fog that covers the future is to identify a long-term trend that will give a particular business some sort of edge." The value of small company investing was emphasized by Wanger when he said: "Chances are, things have changed enough so that whatever made you a success thirty years ago doesn't work anymore. I think that by concentrating on smaller companies, you improve your chances of catching the next wave."

Wanger believed in “theme” investing. For example, if there was a gold rush occurring at the time, he wouldn’t have invested in the actual gold, but instead he would have invested in the companies that sold shovels and picks to miners. This would have a better long term result. This approach is highlighted in the following quote from Wanger: "Since the Industrial Revolution began, going downstream – investing in businesses that will benefit from new technology rather than investing in the technology companies themselves – has often been the smarter strategy."

Wanger reportedly consumed large volumes of investment information. When considering whether or not to invest in a particular company, he carefully looked at the following characteristics:

  • The market for the product/service offered by the company

  • Whether the company had a dominant share of the market

  • The management capabilities

  • The ease of understanding the business

  • The company’s skills in marketing

  • Whether the company has high customer service levels

  • Whether or not it’s possible to purchase a large share in the company

  • The strength of the balance sheet

  • An attractive price

He valued long-term investing and was quoted as saying: "An attractive investment area must have favorable characteristics that should last five years or longer." Wanger believed that it was possible for a good company to be bad stock and that the stock market is often impossible to predict. He once said: "If you believe you or anyone else has a system that can predict the future of the stock market, the joke is on you."

Wanger also became famous for the witty quarterly letters that he would send to shareholders of the Acorn Fund.

Ralph Wanger’s publications include:

Zebra In Lion Country: The Dean Of Small Cap Stocks Explains How To Invest In Small Rapidly Growin

About the author

Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".

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