The story of Grinnell College is a good one. Jason Zweig did a great job telling the story in his June 2000 article "The Best Investor You've Never Heard Of" and the story gets retold in the book Concentrated Investing. As brief background (from the book):
Grinnell is a private liberal arts college notable for its academic excellence and being among the wealthiest educational institutions of any size in North America. With total endowment funds of $1.83 billion in 2014, and just 1,734 full-time students in 2014, little Grinnell College in Grinnell, Iowa, can lay claim to having the largest endowment per student in the United States. It is a testament to unconventional investing, and having Warren Buffett sit on an investment committee for 43 years. Buffett, who served from 1968 to 2011, thought Grinnell to be “kind of a strange place.” His first college loyalty was to the University of Nebraska.
“He bleeds ‘big red,’” said George Drake, former Grinnell president and professor of history, noting Buffett’s support for the University of Nebraska (“big red” is an unofficial nickname). Said Drake:
He once told me, “I don’t particularly care about Grinnell College. Joe Rosenfield asked me to do this, and I’ll do anything for Joe Rosenfield.”
While Buffett has been described as the “architect of the endowment,” it was little-known Joe Rosenfield who played the most important role in Grinnell’s success. Rosenfield, whom Wall Street Journal personal finance columnist Jason Zweig once described as “the best investor you’ve never heard of,” was a 1925 graduate of Grinnell College. After practicing law for 20 years, in 1948, Rosenfield became chairman of Younkers, a retail chain that had bought out his family’s department store in Des Moines, Iowa. Though he joined the board of Grinnell College in 1941, he would not take on responsibility for the endowment until 1968, when he stepped down as chairman of Younkers because he had reached the mandatory retirement age of 65. The endowment held just $11 million in assets when he took it on. When he stepped down in 1999, the Grinnell endowment held an astonishing $1 billion, a compound growth rate of 15.1 percent per year, not counting the 4.75 percent of assets the endowment sent to the college every year for operating expenses. One trustee, Gardiner Dutton, says that the day he joined the board in 1970, Rosenfield told him, “Our job is to make this institution financially impregnable.” He exceeded even that lofty measure. When Rosenfield stepped down in the late 1990s, Grinnell College’s endowment was already the largest per student of any private liberal arts college in the country.
The key to the endowment’s rare investment performance was its unusual investment strategy. Under the stewardship of Buffett and Rosenfield, the endowment bought a handful of positions and then held on to them for decades. Notes Zweig in his Wall Street Journal article on Rosenfield, “In 30 years, [he] made fewer than a half-dozen major investments and has sold even more rarely.”
And even though he sold rarely, the big winners which helped drive the returns were probably still sold too early. It's a testament to wisdom of buying right and holding on (as advised in the book 100 to 1 in the Stock Market), but also shows the difficulty of continuing to hold when something becomes a large position; even if you still have high conviction in the business and the people running it. For Grinnell, here are a couple of those prominent examples:
Shortly after meeting Buffett in 1967, Rosenfield bought $5,252 worth of Berkshire Hathaway—300 shares—for the endowment, and persuaded Buffett to join Grinnell’s board, which he did in 1968. Grinnell held the Berkshire position for more than 20 years, finally selling between 1989 and 1993 for $3.7 million for reasons that neither Buffett nor Rosenfield could remember.
The endowment would make a second serendipitous investment when Robert Noyce, a Grinnell trustee and alumnus, offered Grinnell stock in his then-private start-up, NM Electronics. Noyce had almost been expelled from Grinnell for stealing a pig and roasting it at a campus luau. He would have been expelled but for the intervention of his physics professor who felt that Noyce was the best student he’d ever taught. The professor managed to persuade the school to reduce the expulsion to a one-semester suspension. Noyce never forgot the favor, and made the stock available to the school if it wanted it. Rosenfield told Noyce that the endowment would take all the stock he’d let it have. Grinnell’s endowment took 10 percent of the $3 million private placement (Grinnell put up $100,000, and Rosenfield and another trustee put up $100,000 each). Shortly thereafter the company, then renamed Intel, went public in 1971. Grinnell started selling the stake in 1974, at which time it was worth $14 million, more than half the value of the $27 million endowment. Noyce was concerned that Grinnell should have so much exposure to a single name associated with him, and cajoled Rosenfield to sell. He recalls, “Bob [Noyce] was trembling about it. He’d say, ‘I don’t want the college to lose any money on account of me.’ But I’d say, “We’ll worry about that, Bob. We’ll take the risk.” Noyce eventually wore Rosenfield down, however, and Grinnell fully exited the stake by 1980. On its sale, the Intel investment had generated a profit of 4,583 percent. Rosenfield told Zweig, “I wish we’d kept it. That was the biggest mistake we ever made. Selling must have cost us $50 million, maybe more.” Zweig didn’t have the heart to tell the then 96-year-old Rosenfield that the shares he sold would have been worth several billion dollars in 2000. Perhaps this is why Rosenfield “considers selling to be indistinguishable from error.”