Davis

"The market value of Davis's assets (the stocks in his portfolio) was 1.5 times greater than his actual capital, reflecting the fact that Davis invested on margin. Merrill Lynch, to compare a pumpkin to a peanut, controlled assets with a market value 20 times greater than its own capital. Large investment houses typically operated much closer to oblivion than Davis did."

"Meanwhile, Davis's early stock picks were merrily compounding. He'd started his fledgling company with $100,000 in assets ($50,000 cash plus the seat on the NYSE, valued at $50,000). By the end of year one, his net worth was pegged at $234,790."

"Davis's portfolio had the constancy of a dowager's living room. If a company he owned failed to meet his expectations, he disposed of it. If it merged with or was acquired by a larger company, he'd sometimes take his profit and invest elsewhere. But these were exceptional cases. Mostly, he bought and held. Year after year, he stuck with the same names."

"Davis reiterated to Chris what he'd said decades earlier to Shelby and Diana: "You're getting nothing from me. That way, you won't be robbed of the pleasure of earning it yourself.""

"The Dow rose from 41 to 160, and the S&P 500 did even better. This unexpected bonanza was a good lesson for Davis. It reminded him that stocks don't read the papers or swoon in response to scary headlines. When they're priced for desperation, they can rally in the face of desperation, escaping the dumps while the companies to which they're attached are still wallowing in the dumps."

"Davis's financial life had three phases: learn, earn, and return. The learn phase lasted into his early forties, and the earn phase stretched from his forties into his late seventies. At that point, he tackled the return phase, turning his attention to the lucky would-be recipients of the money he'd hoarded and tended so devotedly."

"Investors who had no idea of the private worth of their holdings were susceptible to being scared out of them. Their only measure of value was the stock price, so the more the price dropped, the more they were inclined to sell. Davis was panic-proof. Wall Street's daily, weekly, monthly, and yearly ups and downs didn't alter his strategy. He held on to shares through demoralizing declines, knowing that the market…"

"Insurers, Davis said, were "growth companies in disguise"-growing like crazy but "people don't think of it that way." Electric utilities fit the same category in the 1950s. Much later, Davis's son found disguised growth opportunities in consumer companies in the 1980s and financial companies in the 1990s."

"Davis acquired 1,000 shares of Insurance USA (a fictitious example) for $4,000 when the company earned $1 a share. He held on until the company earned $8 a share and a crowd of camp followers pounced on the opportunity. What he'd bought for four times $1, they bought for 18 times $8. His $4,000 was now worth $144,000 in Mr. Market's estimation. In terms of profit, he made 36 times his initial outlay, plus whatever dividend checks had landed in his mailbox during the waiting period. Davis called this sort of lucrative transformation "Davis Double Play.""

"As a company's earnings advanced, giving the stock an initial boost, investors put a higher price tag on theearnings, giving the stock a second boost. Davis got a third boost from his margin loans."

"Once he grasped a company by its numbers, Davis turned his attention to management. He was constantly on the road, meeting with executives, quizzing CEOs on everything from the sales force to the claims office to the company's…"

"Jim Judelson left the company immediately. Davis, in the first flush of victory, was grateful to me and said he intended to reorganize everything and wanted me to be head of Gulf + Western Entertainment, which was to include Paramount Madison Square Garden, Simon & Schuster, and all the other entertainment assets. By that time I was a wet rag, exhausted by it all. Without any enthusiasm, I agreed to the changes."

"It was one of those conversations that wasn’t designed to resolve anything, but it rattled around afterward in my head. I began to understand that this was Davis’s method: over the past months, he had ruthlessly weeded out Charlie’s loyalists in the company. And the way he asserted his authority was by forcing the number one person in each division to fire the number two person. Once he had done that, he had the balls of the number one guy in his pocket."

"Rupert and I met secretly at Hillcrest Country Club across the street from Fox, where Davis was a member. It was just the two of us. Rupert is gifted with great charm whenever he is after a goose, and it was on full display. He wanted to know what my plans for the company were. As I told him, he was completely enthusiastic, and the hot bath of Rupert Murdoch’s enthusiasm is something quite extraordinary. The only issue that worried him about buying into Fox was my agreement with Davis. He said he’d be very uncomfortable if by contract he could talk to me only once a year and couldn’t speak to any Fox executives. I said that was a purely defensive move on my part toward Marvin Davis, and that I thought with him I’d enjoy more collaboration."

"He called Murdoch and agreed to sell him his 50 percent for $350 million. I was thrilled to finally be done with him. But my thrill was stayed by one last gauntlet. After all the details had been ironed out, weeks went by, and Davis began braying around town that he wasn’t sure he was going to be out of Fox, because Murdoch probably didn’t have the money to close. I had no idea why he would trash Murdoch, other than he didn’t want people to believe he’d been forced out. It was just nasty. He held on to the final signing papers for days without returning them, crowing publicly th"

"First, he began to sell the stock portfolio, which Charlie had brilliantly built up to almost $1 billion (a huge sum in 1983 dollars). If Davis had done nothing other than keep Charlie’s stock investments over the next ten years, they would have grown to be worth more than every other asset in the company. Davis then started to sell off the heavy-industry companies. Next he peeled off the insurance companies and all the other profitable businesses."

"I arranged for Michael and his wife, Jane, to come to Marvin’s house for get-to-know-each-other drinks. It was an awful meeting. Marvin didn’t exactly jibe with the Eisners. First, there was Marvin’s *Beverly Hillbillies*–ridiculous house—an eleven-acre, forty-five-thousand-square-foot mansion with eleven bedrooms and seventeen bathrooms, a huge granite pile that had originally been built for Lucy Doheny Battson and was as formal and proper as the dumpy Davis was ill-suited to be inside it. As drinks were served, out came about three pounds of caviar, two pounds of which Marvin gorged on in the thirty-minute interview."

"One can imagine Davis, hearing that it was me in the hunt for Paramount, clutching fiercely at whatever pearls he owned, as he realized how humiliating it would be for him if I became his boss. Seeking the only safe harbor he could find, he quickly made a Faustian bargain to sell the studio to Viacom, controlled by the voracious Sumner Redstone. In this deal, at least he’d survive and keep what little dignity was now on offer. Even though he’d have to work for Redstone, the roughest of the roughest, he’d still remain Paramount’s CEO."

"The only other senior man the board knew was Don Oresman, a cynical and tricky lawyer from the firm of Simpson Thacher who, as outside counsel for the company, attended all the board meetings. I had no clue then—but came to understand later—that Oresman and Davis, knowing Charlie was sick, had been plotting together for years to take over the company."

"When I knew I was going to leave I did eventually tell him. But I’d held the information too close for too long and he’d grown to distrust me. His reaction was to tell me he thought I’d been keeping him and Davis apart for competitive reasons. Although he slowly came to understand why I was standing between them, he never fully accepted what was the purest of motivations in protecting him, apart from my just not wanting Davis anywhere in my pants."

"I don’t think he cared whether I was Barry or Harry or Billy or Dopey. Davis hated putting up his own money for anything (it later turned out that he’d even borrowed the money to pay for the paintings on the walls of his house). As for me, I simply needed someplace to go. It wasn’t as if I craved running Fox, though I did smile at the thought that not so long ago I’d been a romping teenager jumping over the fence at Beverly High to roam its back lot."

"Before I arrived, Davis had been having a good time at Fox. He liked lording his status over everyone on the lot, and liked Hollywood and all the extracurricular stuff that went with it. The Davises were very socially ambitious, and they had an interesting technique to attract celebrities: they would send them elaborate flower arrangements or gifts, invite them to some event, and then send a thank-you gift afterward. I said to some of my friends who received this graft, “Rather than accept these gifts, why don’t you just get paid directly in cash for coming? Why don’t you say, ‘Ten thousand dollars a pop for drinks, one hundred thousand to come for dinner’? Because, you know, this is not about being social. This is about being bought, so you might as well get paid in cash without the froufrou.”"

"In this bleak environment, Gibbs did his duty for several years, devoting a couple of days a month to the Freightways board. Davis retired in 1981, leaving Gibbs as a full director. Pettigrew stepped down as managing director in 1983, being replaced by Trevor Farmer, although he remained very powerful as deputy chairman, with a small but not insignificant personal stake in the business. He was also on the board of New Zealand Forest Products. Freightways suffered from the fashion for excessive diversification that afflicted most large New Zealand companies of the era. Under Pettigrew it had bought a tinned fruit company in the Hawke’s Bay. Pettigrew had also wanted to buy a joinery company, but Gibbs fought against the idea, arguing that companies have a limited range of talents and that trying to do everything wouldn’t work for long."