Buy Low, Fix Fast, Exit Slow

"The Laurel-in-the-Pines deal, Larry Tisch’s first big deal, encom- passed two themes that would characterize practically all of his invest- ment decisions. First, he showed an unshakable confidence in his own instincts and a willingness to defy conventional wisdom that didn’t make sense. Second, he showed his inclination to avoid overpriced investments—such as Florida hotels—and their accompanying higher downside risk. The family resisted the temptation to be swept up in the speculative fever in Florida. Instead, they went into a far more conservative deal—one that left plenty of room for error—on terms that gave them a few years to make a go of it before committing to an outright purchase."

"In Tisch’s view, if a business had no prospect for yielding the mag' nitude of returns he could get in the highly liquid stock and bond markets, then that business should be sold and the cash added to the investment portfolio until something better came along. The Tisches put Lorillard on a crash diet. Besides Bennett, six more top executives left. Their jobs “simply vaporized,” according to one executive, leav- ing behind “a residue of bitterness” that Tisch acknowledged. 1"

"What worked for Tisch wasn’t having a plan but having a clear set of principles for determining when to buy an asset and when to sell, whether it was a business, a commodity, or a security. He looked for bargain-priced assets whose values were depressed only temporarily typically, because of mismanagement. His overriding requirement was that he would put no more into an investment than he could reason- ably expect to get out of it under a worst-case scenario. Once he owned an underperforming asset, he aggressively rooted out the cause of its stagnation and made the changes necessary to turn the tide, often by gaining ownership control and taking over management him- self. A key element was Tisch’s ability to quickly determine whether an investment met all his requirements and to act fast."

"For Larry, the destruction of Laurel-in-the-Pines was no cause for tears. Indeed, one of his strengths as a businessman was emotional de- tachment from investments. “You just don’t fall in love with your as- sets,” son Andrew said. That detachment allowed the Tisches to build equity fast. They traded hotel properties much the way a Wall Street money manager works the stock market. They bought or leased or built. They added value. They sold them. Sometimes they leased them back. “By the late 1960s, we had 13 hotels,” Andrew noted. In 1994, “we still have 13 hotels, though not all the same hotels. We leased them, sold back leases, managed them. Each deal has been a profitable deal unto itself. We never had to be somewhere. Even in the hotel business, we’ve just been trading assets.”"