Lessons From the Man Who Sells to Buffett

There's dumb money, and there's smart money. And then there's Sherman money.

You know all about dumb money, and a little bit about smart money. But, chances are, you have never heard of Sherman money. That's the kind of well-informed money that buys the most-hated stocks at very low prices ahead of the smart money, holds a long time and stealthily feeds them out, usually amid a love fest, at high prices to the dumb money.

Bruce Sherman is that kind of money, that kind of investor. The kind that even Warren Buffett comes to see when he's in a buying mood. The kind that we can be thankful to learn from in this week of gratefulness.

Chief executive of secretive Private Capital Management of Naples, Fla., Sherman specializes in taking large to very large stakes in up to 75 companies at a time, and holding for as long as it takes to make a bloody fortune. In the past four years alone, he has sold four companies to the Buffett investment vehicle Berkshire Hathaway(BRK.A Quote - Cramer on BRK.A - Stock Picks), including the ice-cream joint International Dairy Queen, carpet maker Shaw Industries and children's clothing maker Garan. Gross returns for his account are 18% annualized over the past three years through Sept. 30, while the market was down 13%; 19% annualized over five years, while the market was down 2%; and 24% annualized over the past 10 years, while the market was up 9%.

Not bad for a public-school kid from Queens who spent his first decade in business as a Big Eight accountant fancying up financial statements for public companies -- and learning where the bodies could be buried. Not bad for a shy number-cruncher whose first big job outside New York was as financial consigliere for the fabled Collier family of Florida. Not bad for a University of Rhode Island grad who started with a stake of just a couple million dollars and has parlayed it into the least-celebrated, $11 billion investment company in the nation.

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