This conversation is part of our special series, “Best Practices for Building a Great Investment Firm”. We speak with established and emerging leaders in fund management, institutional capital allocation, and family offices to uncover enduring principles for long-term success.
We had the pleasure of speaking with Dave Sather, founder and CEO of Sather Financial Group, based in Victoria, Texas. Sather Financial is a “fee-only” financial planning and investment management firm responsible for overseeing more than $2 billion in client assets.
In this conversation, Dave shares key insights into building a successful financial advisory firm, navigating client relationships, and cultivating long-term value investing principles. Celebrating over 26 years at the helm of Sather Financial Group, Dave brings a wealth of practical experience and thoughtful perspectives to investors seeking to deepen their understanding of how to establish and sustain an advisory business grounded in trust and long-term growth.
Dave’s journey began in the modest setting of Victoria, Texas, shaped by a desire to balance personal and professional life, a decision spurred by family commitments. His candid reflections on the early challenges of cold-calling and the realization that traditional brokerage models didn’t align with his value-investing principles offer powerful lessons for aspiring financial advisors. Dave emphasizes the importance of authenticity and maintaining a clear moral compass in serving clients, often noting that great advisory relationships are built not just on financial acumen, but on understanding and addressing the comprehensive needs of wealthy individuals, from tax and estate planning to retirement and risk management.
Central to Dave’s approach is transparent, direct communication. He describes the meticulous attention he and his team give to client relationships, advocating for managing separate accounts rather than pooled funds to ensure transparency and foster lasting trust. His commitment extends beyond financial strategy, touching on behavioral finance — highlighting the need to help clients navigate not only market volatility but also their emotional responses to financial decisions.
Moreover, Dave shares valuable insights into his firm’s internal practices, such as profit-sharing and peer evaluations, which cultivate a cohesive, motivated team environment. He also outlines his thoughtful approach to succession planning, underscoring the importance of giving talented team members ownership stakes to ensure continuity and shared success.
Finally, the interview touches on Dave’s passion project, Bulldog Investment Company at Texas Lutheran University, highlighting his commitment to mentorship and education. This successful program underscores his broader philosophy and his dedication to nurturing the next generation of investors.
The interview was conducted by Tyler Howell of MOI Global in May 2025.
Topics and themes:
Early Career and Founding Sather Financial
Client Relationships and Communication
Behavioral Finance and Client Education
Building a Cohesive Team and Firm Culture
Succession Planning and Ownership Transfer
Insights into Practical Value Investing
The Bulldog Investment Company Story
Enjoy the conversation!
Stay tuned for your personal invitation to our event of the year, Latticework 2025, to be held in New York on October 7th. The Latticework summit will explore intelligent investing in a changing world. Featured speakers:
Chris Bloomstran, President of Semper Augustus Investments Group
Tom Gayner, CEO of Markel and Director of The Coca-Cola Company
Saurabh Madaan, Managing Member of Manveen Asset Management
Bob Robotti, President and CIO of Robotti & Company Advisors
Tom Russo, Managing Member of Gardner Russo & Quinn
Will Thomson, Managing Partner of Massif Capital
Christopher Tsai, President of Tsai Capital Corporation
Ed Wachenheim, Chairman of Greenhaven Associates
A limited number of seats will be made available to our Substack subscribers.
Transcript
Tyler Howell: I’m joined by Dave Sather, founder of Sather Financial Group in Victoria, Texas. I should mention we’re in Omaha. This morning, we held an event here for MOI Global, of which you are supporters. I very much appreciate that, as well as everything you’ve done for the MOI Global community.
You’re celebrating 26 years this week, so what I want to do is dive into how you built and manage your fund and what advice you would give to someone who wants to do something similar. Let’s start with your background and work our way from there. Tell me about Victoria, Texas and your process of planning and strategizing to start your firm.
Dave: Victoria, Texas is where my wife lived. As a prerequisite to getting married, she told me, “I love you, but I’m not so sure about living in Houston or any other big city.” She had family obligations in the area, and I was trying to be respectful of that.
I started trying to figure out how to move to Victoria, Texas and discovered that UBS had an office there. I ended up getting a job. I cold-called everybody in the phone book for the first three and a half years. I decided that was not how I wanted to make a living.
The oldest bank in Texas happened to be in Victoria. Even though it had run a trust department for 100 years, it never had a trust investment officer. At the ripe age of 28, the bank hired me to package its investments and start its brokerage operation. At a very young age, I was in a position to sit in on every committee a bank would have. I got to see how credit flowed through a given community, who was creditworthy, who was not, and which businesses made money.
Victoria is very much of an agricultural area. Still, we never met a wealthy cattle rancher who didn’t have a few oil wells in their backyard. There happened to be a little oil money, so that was how I got there. The first eight years of my career were at PaineWebber, followed by a bank’s trust department. I didn’t have some grand plan about leaving and starting my own firm. Rather, it was 1998-1999 and people were following the mania of the day – tech, internet, and telecom.
You could see these companies with no earnings, and many of them had no sales. They were merely concepts, and they were being bid up – sometimes 50% in a day. You’re sitting there saying, “I know that logically and rationally, this does not make sense. It will end badly, but everybody is headed in that direction, and here I am, writing commentaries for the bank’s clients, telling them, ‘There’s not a new economy. It’s the same economy. Be careful. This is going to end badly.’”
The bank didn’t want to pursue that more value investing, traditional Buffett/Munger mentality. It was a signal to me that maybe I didn’t fit in there. My time there definitely helped me to understand I was a square peg trying to fit in a round hole. The other thing I realized was that I’d never met a wealthy person who only had investment needs. They have tax planning, retirement, estate planning, and risk management needs. I thought, “If these are the highest net worth people in our community, we need to make sure we are helping them evaluate anything with a large price tag on it.”
We started doing that, and I wanted the bank to pursue it as well, but the people there were like, “No, that’s really not what we do.” I thought that’s exactly what they should be doing. The fact that they did not want to again helped me understand I was a square peg in a round hole. When I left to go pursue that, it was like lighter fluid. Our firm started growing by leaps and bounds. It made it a very easy transition for me to offer a service that was differentiated from what anybody else was offering and create great relationships along the way.
Tyler: Can you talk about your client focus? In your mind, what are the key tenets of maintaining that client focus and relationship-building skill? How has that been important to your success?
Dave: I live in a rural community. Our town has a population of 60,000. The closest large city is roughly two hours away. In small country towns, people do business based on relationships. They are very slow to move relationships. Typically, we get business based on a seed planted 10 years ago or earlier. It takes a long time for that tree to germinate and produce wonderful blossom.
There are a couple key things. One, we try to be very transparent in what we’re doing. We manage separate accounts, which is much harder than managing a pooled fund, but in doing so, our clients have full transparency into what we’re doing every day. If we buy a new holding or sell something, they see it immediately. There’s a lot more transparency. Even though that’s more difficult, we believe it gives us a much stickier relationship as opposed to a person investing into a pooled fund.
That is a huge differentiator, just being able to pick up the phone when a client calls, especially when the market is very choppy. Understandably, we spent a lot of time this year talking about tariffs – how it will or won’t impact them – and trying to teach them about the things that truly matter to them, their family, and their portfolio. If you embrace that communication, you can head off a lot of bad things before they ever happen. It’s about trying to be a good communicator.
We are big believers in being able to write out a thesis. It may be an 80-page research paper, but you’ve got to be able to write out the thesis in a one-page executive summary. If you can’t do that, then you don’t have command of the subject matter. You won’t be able to explain to your clients why it matters to them. If they don’t see how it will take care of their family, they start to veer off course. “Well, I hear my neighbor is doing great things, and I’m going to follow that path.” They’ve got to understand the how and the why – at least at a conceptual level – of how you will take care of their family.
At the end of the day, the reason we are on the face of the earth is to take care of other people. It might be investment management, it might be accounting, it might be law, but we are dealing with the most intimate thing you can ever have a conversation about with a stranger – their money. As a result, we’re often trying to help them with very complicated yet very sensitive issues. Many of our conversations turn into almost counseling sessions. There’s a lot of behavioral finance dynamics that go into helping people feel comfortable with their money, and then – as Morgan Housel would say – help build out an investment allocation that will allow them to compound for the longest time possible. Whatever the best investment strategy is, it’s the one they can hang in there with the longest time frame.
Tyler: Can you talk about the memorandum of understanding you like to write out for your clients? Even structurally, this seems like a good piece of advice for someone trying to build a client base or wanting to strike out on their own.
Dave: Yes, it’s interesting. When you’re young and hungry, you will do a lot of things to put food on the table, but in time, you realize there are only 24 hours in a day, and you’ve got to allocate them to all the stakeholders. It might be your clients, your staff, your family, or just peace of mind for yourself.
When you realize that, the 80/20 rule totally matters. The larger the client, the less demanding they are. Quite often, they are less fee-conscious. They are much more understanding of where we are headed, why, and if it makes sense.
However, many times, you get people who either want to be in control or just want to use up a lot of your time. Some people simply aren’t a fit in terms of personality. If I see your name come up on our caller ID and I cringe, thinking, “If he wants to go to lunch, will I come up with an excuse not to go?” then you’re a client who shouldn’t be in our world because I’m not going to do as good a job as I should be able to do. That’s a huge one. It’s one that comes from time.
We’ve been very blunt with clients in certain cases. We tell them, “We gave you this advice. You did not listen to us, and it hurt you. If you’re not going to listen to us, we’re not going to allocate good time, resources, and input into your life because we don’t think you value the relationship.” There has to be a two-way street. This is critical.
It’s funny. As we put it in one paper, if a doctor or a lawyer walks through our office and a guy who runs a machine shop walks through our office at the same time, nine times out of 10, we will take the machine shop operator over the doctor or lawyer. Doctors and lawyers are prima donnas. They are used to spending a lot. If they make $500,000, they spend $501,000. They’re used to people falling at their feet and telling them how smart they are. The machine shop operator is trying to run a business in the most efficient manner. You are part of his professional team. He expects you to do your job. He wants to have a meaningful relationship, but it’s a two-way street, and he recognizes we are there to provide him with value. That is the cornerstone of a great relationships.
Again, it’s knowing who we like to work for. If you’ve ever read The Millionaire Next Door or The Millionaire Mind, those are our clients, our bread and butter, what has allowed us to get to almost $2 billion in assets. It is working for entrepreneurs that work really hard. They wear boots and blue jeans and drive pickup trucks. They are sophisticated people in their fields, but they recognize their sophistication does not extend to the field of investing. They hire us to bring that together and to coordinate with the rest of their professional team.
Tyler: If I walked into your office tomorrow and wanted to become a client, would you actually write that down – the expectations you have of me and those I should have of you? I’m assuming you communicate all these things upfront. Do you give prospective clients a sheet of paper? How do you go about communicating that to a new client?
Dave: We do have a written document. It stays internal because it’s become a training tool for our staff. You are an engineer by training, and I will tell you that engineers fall into a special category. We love them, but they’re very difficult to deal with because they try to figure out what can go wrong with this process, and then they reverse it to make sure it doesn’t.
There are so many variables in the investment world that engineers often have a hard time getting comfortable with. We have become highly skilled at that, but we have some engineers who want to micromanage. Our checklist – that memorandum – contains certain items that will be a red flag to us, that say, “Tyler continues to try and micromanage the process. Every time we say we put Dollar General in his portfolio and it goes down, he immediately starts harping, ‘What’s the thesis? I need to hear this over again.’”
Then we become increasingly upfront. “You hired us to do a job. You are not allowing us to do the job. You are paying us to do a job, and you are not getting value out of it. If you’re not going to get value out of it, we’re not going to have a good relationship, and that is going to harm it, and ultimately, we’re going to move on.”
It’s on a case-by-case basis. You don’t want to come out with the big guns on day one and go, “Here are the 10 things; if you violate any of them, you’re fired.” Sometimes, this seems too heavy-handed. We try to gain an understanding of who people are. Going back to the behavioral finance side of things, if I had college to do all over again, I would major in behavioral finance. The how and the why people make financial decisions would make us so much better at what we do today, at helping them understand, “This is why we’re here, and this is how we help you and your family. If you want our help, this is how it will need to happen. Otherwise, you’re not going to get good value from the relationship.”
Tyler: Do you ever wonder if an asset manager who doesn’t have an economics education or has never been through a value investment program might have some advantage in trying to do this business?
Dave: Actually, yes. I will tell you that I have a business degree, but I have never taken an investment class in my life. I was not exposed to some of those concepts until I got to graduate school. Even in graduate school, they didn’t make sense.
Fortunately, very early on in my career – this is a story I’ve told before – I was getting ready to go to New York for some of my training. There was this older gentleman who said, “You’ll go to New York and do some of that fancy book learning.” I said, “Yes, sir.” He went, “You don’t need any of that. I’ll tell you everything you need to know in one sentence.”
I rolled my eyes and dismissed him. He said, “Eat them, drink them, smoke them, go to the doctor, and look good when you get there.” I had this glazed look in my eyes, so he went, “I’ll repeat it because I can see you don’t get it. Eat them – your food companies. Drink them – your beverage companies. Smoke them – I don’t smoke, but if people want to, I’ll invest in it. Go to the doctor – healthcare companies and things like that.”
Then he stopped and said, “You’re engaged, aren’t you?” I said, “Yes, sir.” He went on, “I’ll tell you something about your fiancée that you don’t know but need to know. She’ll allow the house to burn down around her before she goes out in public without her hair and nails done. My last category for you is beauty supplies – things that make us feel good about ourselves. If you invest in those types of companies, you will never be the popular kid at the cocktail party, but you will always be able to keep your clients in the game.”
In his simple way, he was giving me volumes of investment research because he was ultimately saying, “You’ve got to find the path that allows them to compound for the longest period of time.” I went off to New York and started my career. Shortly after that, I began reading about Buffett. He was already the largest shareholder in Coca-Cola – drink them. Then he bought all of Dairy Queen – eat them. I started studying everything I could, inhaling it.
Because I did not have a formal investment background, I was much more open to accepting that type of education – “eat them, drink them, smoke them” – and seeing Buffett buying Coke and Dairy Queen helped me understand that this is a great pond to fish in. Let’s dig a bit deeper. Let’s try and figure out what makes them great businesses. Even if I took the investments course in undergraduate or graduate school, I never would have been exposed to that. The fact that I wasn’t exposed to it allowed me to be a completely blank slate when I was.
Tyler: What advice would you give to a young asset manager about building a team?
Dave: When I started, I had been in the business for eight years. I had done some aptitude testing. They told me I was good at business, working with people, and languages. I didn’t realize it at the time, but finance and explaining value investing is a language all of its own. I’ve got that gift of being able to explain things in one page or less.
They also told me I was awful at paperwork. I am the guy that can bring it together. I can sit down with people and help them understand the bigger picture, but I am not good at organizing and collating and filing. At 19, when I took that test, they said, “You haven’t started your investment firm, and you won’t for another 13 years, but the first person you need to hire is a top-notch admin person.”
That was employee number one. For employee number two, I thought, “I do need to find a person who has the same skill set as me. In case I’m killed in a car accident, they’ll be able to step right in.” I hired somebody who is pretty much the 180-degree opposite of me. He is now the president of our firm. His skill set is so complementary to what I do, and we make a wonderful team. We have the commonality of seeing value investing very similarly, but his skill set on the technical side is something I’ll never have. My ability with people comes naturally to me, so we work well as a team.
You’ve got to find people who bring the right skill set to the table. You also have to find people who genuinely are curious because every day is a new day in this business. What worked in the 1990s didn’t work in the 2000s. What worked in the 2000s didn’t work in the 2010s. Now that we’re in the 2020s, it’s a whole new ball game. Still, at the end of the day, our job is to take care of people and to care about people. If you’re not sincere about why you exist – that my job is to take care of you – then you may have some people who are great on the technical side, but they may not have the right moral compass or may not find the fulfillment that they think they’re looking for.
Tyler: Can you speak about your peer evaluation system?
Dave: Early on, it was an office of three, and every conversation went through me. Now we have two offices – five people in one and six in the other. The other office is two hours away. I am no longer the focal point of every conversation, and that’s a good thing because it tells me I’m not the most important thing – we have a team now.
In thinking through that, I recognized that I’m no longer in the catbird seat in terms of trying to be able to evaluate who is doing well, who’s having good conversations, who’s struggling, and why we are struggling. Coming out of 2008-2009, I did two things. One, I established a profit-sharing plan in which every employee participates – 7% of the firm’s net profits are distributed once a quarter. Everyone who’s been with the firm one year or more is eligible.
Whether you are the king and ruler supreme of all investment managers or an admin person, I want you to have a bite of the apple. Otherwise, what happens is the people capable of developing new business come in, make it rain, and dump a ton of paperwork on the admin team. If the admin team don’t get a bite of the apple, they resent all that new business. That was point number one.
Two, as we got bigger, I realized that I did not have the same command. When divvying up the profit, 25% is longevity, how long you’ve been with the firm, and 75% is peer evaluations. Everybody in the firm evaluates everybody else once a quarter and says, “This is what’s working. This is what’s not working. I’ve got a problem with this person, but I love working with this person, and here are the reasons why.”
Even though our people have lots of conversation every single day, it allows me to understand who’s getting along, who’s not getting along, who deserves to be promoted, and who needs some help in getting from point A to point B. That’s the heart of it. It’s no more complicated than that. Everybody has to be evaluated on a scale of one to 10. Then I ask them to give me written feedback of what’s working and what’s not.
Tyler: When you instituted the 7% profit share, could you demonstrably see the incentive in your admins, for instance? Are there ways you can track that? Are there anecdotes you have about seeing that incentive play out in day-to-day business?
Dave: Yes, most definitely. My first admin had worked with me at the bank. I remember when we put that into place, we had a relatively new admin come in from Wells Fargo – a great organization. Cindy, my long-time admin, saw the new one throwing a piece of paper in the trash with a paper clip attached to it. She said, “Hold on a second. We don’t throw away paper clips. You’re affecting my profit sharing. That impacts my ability to pay my mortgage and send my daughter to college. Please be careful when it comes to using company resources – we try to do so in the most efficient manner possible.”
I didn’t have to say a word. The employees were reinforcing the mindset that I wanted them to embrace – building a culture of keeping our expenses very low. If we do so, profitability goes up, and everybody shares.
Tyler: If someone’s watching this, and they’re like a 1999 Dave Sather at a bank and thinking about striking out, what would you tell them about setting up? You spoke about the idea of playing defense and being prepared. What are the key things you would suggest someone do to get off on the right foot?
Dave: First, I think you’ve got to have experience in the business. I see a lot of people who want to go down a certain path but don’t have the requisite level of experience. Now that I’m 26 years in, many people have asked me, “Don’t you wish you had left the bank earlier?” Sure, in a perfect world, but a perfect world doesn’t exist. I needed those eight years of meeting people and learning how to develop my craft and manage portfolios.
For much of this, I was very much on my own. I was trying to figure out what worked for me, what worked for clients, how to explain it to people. I needed that time. I needed graduate school. I needed another eight years of experience before I went off on my own. That was point number one – get the requisite level of experience. Whether that means working for a brokerage firm, a trust department, or wherever, you are learning on somebody else’s dime and time. Don’t overlook that.
Two, I knew my job was to take care of people. I knew the market was getting very frothy in 1999. Again, understand what your mandate is and your moral compass says about why we exist. There were some cultural issues going on at the bank – they wanted to sell very high-commission products. I wanted to get away from that. I knew the combination of pursuing the highest-commission product along with the valuation of the market was going to be very bad. So, set yourself up to take care of the people you are supposed to.
The other thing is that I was relatively young when I married, and money was still very tight, but before I left, I had saved up about enough to live off of for three years. I decided that if I couldn’t make this work in three years, it may just not be in the cards. I had enough money to where I knew I would be okay. I could make sure that I didn’t have to make short-term decisions. I could invest in the business and in people for a longer timeframe. Those things were very important.
I never told my clients ahead of time that I was leaving the bank, but there were always rumors that it was going to be sold. My standard response to everybody was that there are rumors to that effect. “I have no knowledge or insight into that, but if the bank does get sold, no matter where I end up, I will always be available to take care of you and your family.” Most people were smart enough to read between the lines, so 15 months later, when I did leave, they were like, “This is what Dave was talking about.”
There was the money issue. There was the communication issue of “I am here to take care of you.” I spent a lot of time over a 15-month timeframe writing my business plan, refining it, and thinking about which people were most likely to go with me if I did leave. Those things all came true in such a manner that when I did leave, I was also very upfront with them. I said, “I am a staff of one. It is unfair to ask you and your family to move your money from the oldest bank in Texas without me having the necessary safeguards in place.”
I said, “If you come with me, if you’re one of my original clients, I’m not going to charge anybody for the first three months because I know I’m going to have to get systems up and running. Something will go wrong, and I need to be in a position where it’s not hurting you financially.” I think they appreciated that. So many of my clients were entrepreneurs. They remembered those days.
That combination of things allowed us to be positioned defensively. I’d saved up enough money. I had paid for all my technology and all that stuff. We didn’t borrow a penny to develop the business. After that, it was a matter of following up with people and doing a good job from an investment perspective.
Tyler: Speaking of getting the systems up and running, are there vendors, software, and processes that you think are key to your success or that you would advise people to look into?
Dave: Yes, absolutely. MOI Global – there’s a shameless plug. I’ve been friends with John Mihaljevic since 2009. I remember when he was starting MOI Global. He was going down a very similar path to mine. I just liked him. There’s a true sincerity in terms of understanding the business and trying to do things right.
Subscription to MOI has always been greatly appreciated, largely because of the people I’ve met along the way, but I don’t think you have to spend a fortune. You can drop $60,000 a month on a Bloomberg machine, but I don’t think it’s necessary. It depends on how you want to run your business. If you want to do this on a tight budget, you can get a Value Line subscription and a Morningstar subscription through your local library for free.
GuruFocus.com was founded by another Texas entrepreneur, Charlie Tian. I’ve known him almost since he started. That is a platform we use on a regular basis. There are wonderful tools for pulling 13Fs and for screening. There are also a lot of articles on there. That’s not very expensive.
After you get your feet on the ground, you can start trying to figure out what else works. On the portfolio management side, in terms of producing reports and things like that, we work with a company called Advyzon. It is not super expensive, but it helps us do a lot of heavy lifting, especially with us managing multiple portfolios.
The tough thing in terms of software is that the good ones are always getting bought out, and then you’re almost back to square one, trying to find somebody else hungry enough to return your phone calls and also willing to do it at an affordable price so you can then grow together. There are a lot of software providers that promise everything, but functionally, they’re not as good as they say they are.
Tyler: Has AI become a part of your process at all anywhere in the business?
Dave: Trying to. Joe is one of our new guys. He has 10 years in the Air Force, doing human intelligence. He’s got a curious mind, asks great questions and thinks about things. He is the one who’s probably spearheading that.
If we can write AI-informed or induced code that says, “Go to a 13F filing on a regular basis and start extracting certain data,” it will allow us to do more heavy lifting in a consistent manner. I won’t have to hire more and more people, so we will be more efficient.
The problem is that if the data is not in the exact same format in the exact same place every month, then all of a sudden, you’re constantly having to tweak it. It doesn’t mean it can’t help. In terms of some of the coding that goes along with how we use Daloopa for doing Excel-type add-Instagram, combining the worlds of AI and Daloopa with Excel add-ins allows us to start doing a lot more of the heavier lifting, but it’s certainly not the kind of thing where you go, “Hey, ChatGPT, tell me the best value investments to make today.”
That is pie-in-the-sky type of stuff. It’s still fairly early in the development, but we think there’s high hopes for it over the next 10 years.
Tyler: I know you’ve spent a lot of time thinking about succession in your firm. What has that experience been like? What would you impart on someone running a successful fund who should maybe start thinking about this?
Dave: A good friend of mine ran a large insurance company. I watched him navigate that. His firm got too big before they went down the succession road. They ultimately had to sell to an external party because it was the one with deep enough pockets. The employees did not have deep enough pockets.
I always had a goal that at age 50, I would start transitioning some of the ownership, with a significant portion to be moved before I turned 60. I’m 58 today. In the first round, there were four key lieutenants of mine. I gave them 1% ownership, and then I owner-financed it, so they weren’t out of pocket at all. It gave them a seat at the table and allowed them to see the profitability of the firm. My hope was that it would open their eyes and make them say, “This is something I really want to be a part of long term.”
I also think that if you have with great people and don’t give them a bite of the apple, you’re more or less inviting them to become a competitor. Why would you open up the kimono and show them everything that makes your firm valuable and then say, “But you’re not so valuable that I want to keep you here forever”? I’ve been very upfront that if I am the only one who becomes wealthy from this endeavor, I’ll be upset.
Round one was four new partners – each got 1% ownership. They didn’t have to put out any cash. When round two came around, one person was not in a position to go to an investment bank. Another person said, “I’d like more ownership, but I don’t want to write a check for it.” That told me an awful lot about their motivations. This person has since left our firm and the industry. However, the other two – Warren and John (Warren is the president of our firm, and John is vice president) – went to an investment bank. They borrowed a significant amount of money to buy 17% of the firm each – sizable ownership.
They both sat down and said, “We see the profitability of the firm. We see the clients. Why wouldn’t we want to be part of this?” It took pretty strong intestinal fortitude for them to tell their spouses, “We want to borrow a couple of million bucks to buy into this. We think it’s going to work.” I told them, “Warren, John, I want you to be my lifetime business partners. We are in this together. If I make a bunch of money, I want you along for the ride.”
There’s an opportunity for round three, for the next generation to step forward as well. I would imagine they’ll be in a position where they’ll borrow smaller amounts of money, but to me, that’s what this needs to look like.
The other thing is that I don’t have any children. As a result, succession within my family bloodline is not going to happen. I wish I had children. That would have been a wonderful blessing. I think the fact that I don’t have children to pass the business down to means I’ll make a better decision in terms of succession.
Tyler: Being involved and invested in the process can only reinforce the value of the total business.
Dave: Absolutely.
Tyler: I’d like to talk a bit about Bulldog Investment Company. I know that’s very near and dear to your heart. Can you tell me what that experience has been like for you? What do you think is unique about that program?
Dave: My alma mater is Texas Lutheran University. It is 1,400 students in Seguin, Texas, which is halfway between San Antonio and Austin. It has always had a very strong business program, but it is not a Wall Street feeder program. It’s in rural Texas, but I had gotten an incredibly good education there – great on the fundamentals and the discipline.
I was serving on an advisory board for the business department. We were talking about the importance of internships. When I left, I started thinking about what we do – day in and day out – in terms of identifying competitive advantages, running through the financials, and figuring out why a business is successful or why it isn’t and what the hallmarks of a good investment are. I thought, “There’s an opportunity to create an internship here.”
The goal was to create an internship that met at Texas Lutheran every week to teach how to break down businesses, identify it, and then package it in a Warren Buffett wrapper. The program started by teaching kids how to break down 10Ks, 10Qs, and stuff like that, but then they had to split into teams and research ideas that they thought conformed to the way Warren Buffett would analyze a business and something he might want to own inside of Berkshire Hathaway.
The teams would then present their best idea – three times a semester – to a professional panel of investors. That was our board of directors. Sometimes it would be me, sometimes the CFO of the university, and sometimes we would have guest judges. That’s how we started populating the portfolio. That was how the discipline worked.
Initially, I told students, “You have got to be in the program a minimum of two semesters.” However, at the end of the two semesters, I thought, “See you later! Have a good life!” but they didn’t leave. I thought, “Well, I’m not going to kick you out. If you want to show up every Friday afternoon for two to three hours and then do even more homework, I am going to embrace you with everything I’ve got.” As a result, some of my best students stayed in the program four and five years, year-round, and they became mentors and teachers to the new students coming in.
We’ve just finished year 15 and are now in year 16. The student portfolio is now over $2 million. They have produced returns in excess of 15% a year since inception. Just as importantly, they have all gone on to do great things with their careers, but in terms of the Bulldog Investment Company program, there’s a competition called the Texas Investment Portfolio Symposium in which other schools with student-managed funds can present their ideas, how their program is structured, their results, and then answer questions from a panel of professional judges.
For the last three years in a row, Texas Lutheran has won it all, beating tier-one schools like Baylor, Rice, SMU, TCU, and Texas State. That’s when I knew this has some pretty cool bragging rights. This last year – year 15 – our accreditation body, the Accreditation Council for Business Schools, which oversees the business curriculum of more than 1,200 schools both in the US and internationally, chose Bulldog Investment Company as the number one student-led business program out of all 1,200 schools.
When I think back on everything that has been produced, I do believe the students go on to do amazing things. They have a career in front of them that will allow them be very productive. Bulldog Investment Company has been very much a focal point of their career success. It’s nice that we’ve been able to get recognition from the Texas Investment Portfolio Symposium and the Accreditation Council. That tells me that great things happen even at small universities if you’re willing to put in the work.
Tyler: Any final thoughts or pieces of advice? We’d love for you to have the last word.
Dave: I think the investment world as a whole can be judged pretty harshly. For anybody who’s listening, I think you already drink the Kool-Aid, but the value investing world is a different subset of the investment world.
I have found there are so many kind, generous people willing to give their time, expertise, and mentorship to help young people, either in college or in the business. They are deep thinkers. They are patient. They are kind. There’s a whole different group of people you get to meet in the true value investing world as opposed to the broader investment world.
Once you realize that, you end up making some lifelong relationships. You and I have known each other quite a long time now. John and I have known each other since 2009. I think about how much better my life is because of the cool people I’ve met along the way. Coming to events like the MOI Global Breakfast here in Omaha, I’ve gotten to meet so many interesting people that I never would have crossed paths with if it wasn’t for the value investing community.
Tyler: I can’t thank you enough for being here. Thank you for your support of this event. I look forward to catching up with you again soon.
(MOI members, access all features, including ways to contact Dave.)
Dave Sather is a CFP and the CEO of Sather Financial Group, a $2 billion firm managing individual accounts headquartered in Texas. Dave has degrees in business from Texas Lutheran University and Texas A&M University. Dave serves on the Board of Regents at Texas Lutheran University, chairing the Investment Committee. He developed and teaches the Bulldog Investment Company internship at Texas Lutheran University. This student managed investment fund has compounded at 15.4% per year over the last 15 years outperforming the S&P 500 by 264 percentage points. Recently, the program was recognized as the top student led business program by the Accreditation Council for Business Schools and Programs, which oversees more than 1,200 programs internationally. Dave also created and runs the Big Dog Endowment program , also at TLU, which teaches analytical and business skills for non-profit and philanthropic endeavors.
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