Why One of Investing's Greatest Minds Bought Banks

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Every so often in this business you come across a figure who reminds you why value investing is not just a discipline but a calling.

Peter Cundill is one of those rare investors whose life and work cut straight to the heart of what we are all trying to do when we buy stocks at a discount and wait for the world to come to its senses. His track record alone would earn him a permanent seat in the value investing hall of fame.

What makes his story even more compelling is the relentless curiosity and absolute commitment to deep value that guided him for more than three decades.

Cundill was born in Montreal in 1938 into a family that had seen both prosperity and collapse. His childhood was shaped by stories of boom and bust. His grandfather had once been a towering figure in Canadian business before going bankrupt. His father survived the 1929 crash and later became a member of the Montreal Stock Exchange. Growing up around the scars and lessons of financial history left their mark. It gave Cundill an appreciation for the fragility of markets that stayed with him for the rest of his life.

He studied commerce at McGill, became a Chartered Accountant, earned the CFA designation in the early years of the program, and spent the first part of his career in the analytical trenches of fixed income and trust investing.

The transformation came in 1973 when a friend handed him a copy of SuperMoney on a flight. As he read the chapter that discussed Benjamin Graham and the idea of a margin of safety, he had the kind of revelation that shapes a lifetime. He wrote in his journal that this was exactly what he wanted to do for the rest of his life.

That moment of clarity changed everything.

Two years later he took over a small underperforming fund and rebranded it the Cundill Value Fund. What followed was one of the great long run performances in investment history. Starting with only a few million dollars, Cundill built the fund into a global powerhouse managing nearly $20 billion. Over 35 years he compounded capital at more than 13% annually.

In the early years his returns were even more spectacular. Investors who placed their trust in him earned many multiples of their initial capital. It was a triumph of discipline, patience, and courage.

The heart of the Cundill method was always the balance sheet. He was a devoted student of Graham and he did not hide it. He believed in buying companies selling below liquidation value. He searched constantly for what Graham called net nets. He bought stocks trading below working capital value. He read annual reports with an intensity that bordered on obsession. If the company had more cash, receivables, and liquidation value than the entire share price implied, he was interested. If the stock was deeply out of favor, even better.

He specialized in situations where the pessimism of the crowd had overwhelmed the reality of the company.

Cundill was not a daydreamer chasing story stocks. He was a forensic accountant with the soul of an adventurer.

He wanted facts, not forecasts. He insisted on tangible assets, very little debt, and the kind of downside protection that allows an investor to survive the inevitable mistakes. He preferred companies that were profitable, that paid dividends, and that were trading far below their previous highs.

He often said that if a stock was cheap enough, he did not care what business it was in. Value was value.

As the years went on and net net opportunities grew scarce, Cundill adapted. He began to look for what he called extra assets.

Hidden land on the balance sheet.

Machinery carried far below replacement cost.

Overfunded pension plans.

Shipping fleets valued at scrap prices.

Foreign subsidiaries that Wall Street had forgotten about. Wherever value was hiding he was willing to dig it out. The world was his hunting ground. He invested in Japan, Europe, Asia, Latin America, and anywhere else he could find what he called the compulsive attractiveness of a bargain.

One of the most remarkable things about Cundill was the physical and mental discipline he brought to the work. He ran marathons, skied, hiked, cycled, and stayed in world-class athletic condition well into his 60s. He believed that the health of the body supported the clarity of the mind.

When he visited companies abroad he did not just sit in conference rooms. He explored, walked, listened, asked questions, and absorbed the local culture. It was the mark of a man who never stopped learning.

He also kept meticulous journals for more than 40 years. He wrote down every lesson, every rule, every mistake, and every realization. He wrote about markets, psychology, and human behavior. He wrote about patience and fear. He wrote about the temptation to chase popular ideas and the importance of resisting that urge. He wrote about the thrill of finding a true bargain. He wrote about the quiet strength required to hold a position that everyone else thinks is crazy. Those journals eventually became the foundation for the book that introduced his philosophy to the wider world.

Of course, he made his share of mistakes. His investment in Cable and Wireless remains the most famous example. The company looked like a fortress with piles of cash and no debt, but the business itself was deteriorating in ways the balance sheet could not fully reveal. Cundill took his losses and moved on. It was a reminder that even the best investors cannot escape the reality that business risk is always lurking behind the numbers. What matters is not avoiding mistakes but surviving them.

As his fund grew into the billions, the strategy inevitably changed. A $20 billion fund cannot buy small net nets the way a $20 million fund can. But even as he adapted, he never abandoned the foundation of his approach. He continued to focus on the balance sheet, on tangible assets, on safety first, and on the idea that buying a dollar for 60 cents gives you the breathing room to be wrong and still come out ahead.

One of the least discussed but most instructive parts of Peter Cundill’s record is his willingness to own bank stocks when everyone else had already written them off. He did not buy banks because they were growing quickly or because interest rates were moving in the right direction. He bought them for the same reason he bought anything else.

The balance sheet was mispriced and fear had overwhelmed reality.

Cundill understood something fundamental about banks that many investors still struggle with today. Banks are balance sheet businesses first and income statement businesses second.

When markets panic, earnings disappear and headlines turn apocalyptic, but the assets and the franchise often remain. If the institution survives, the equity can be worth far more than the market implies.

This mindset led him into Japanese banks in the aftermath of the bursting of the late 1980s bubble. By the early 1990s these stocks were universally hated. Bad loans dominated the narrative. Property values were collapsing. Investors assumed permanent impairment. Cundill saw something different. Large deposit bases. Government support. Assets marked down aggressively. Stocks trading at fractions of stated book value as if the system itself would never recover.

He was not forecasting a clean balance sheet or a return to peak profitability. He was underwriting survival. If the banks merely lived through the crisis, the upside was enormous.

He applied the same thinking to European banks during periods of regional stress. These were not momentum trades. They were classic deep value positions where tangible equity was priced as if it were already gone.

In several cases he treated bank shares as liquidation value plus optionality. If nothing improved, downside was limited.

If normalization arrived, even slowly, the return profile became asymmetric.

Cundill also owned North American financial institutions when they fell out of favor, viewing them almost as hybrid investments.

Part bond. Part equity. Dividend income supported patience while the discount to asset value provided protection.

He paid close attention to capital ratios, funding sources, and asset quality. If the balance sheet was conservative and understandable, he was willing to wait.

Just as important is what he avoided. He had little interest in banks with excessive leverage, opaque exposures, or business models he could not fully explain.

Complexity was not sophistication. It was risk. If the balance sheet could not be clearly analyzed, the stock did not qualify as a bargain no matter how cheap it appeared.

Cundill’s approach to banks fits perfectly within his broader philosophy. Buy when fear forces prices well below intrinsic value. Demand a margin of safety large enough to survive being early. Focus on assets, capital, and survivability. Let time and normalization do the work.

It is a reminder that some of the best bank investments are made not when conditions look safe, but when they look unbearable. Cundill was willing to step into that discomfort, armed with a balance sheet and a long memory of how markets eventually behave.

One area where Peter Cundill’s value discipline showed particular clarity was real estate. He never thought of real estate as a separate asset class or a macro trade. To Cundill, real estate was simply another form of tangible asset value that markets routinely mispriced, especially during periods of economic stress or financial panic.

His approach to real estate investing mirrored everything else he did.

Start with the balance sheet.

Ignore the story. Focus on what the assets would be worth in a rational world rather than in the middle of a panic. He was not interested in projecting rent growth or cap rate compression.

He wanted to know what the land, buildings, and replacement value were worth compared to the stock price sitting in front of him.

Cundill was particularly drawn to companies where real estate sat quietly on the balance sheet at historical cost, often carried at figures that bore little resemblance to true market value. In those cases, the operating business almost did not matter.

If the company owned high quality land or buildings in major cities and the stock traded below the value of those assets, that was enough. The operating company became a free option.

One of his most successful real estate related themes involved property companies and conglomerates in Japan following the collapse of the property bubble. Japanese land prices fell dramatically in the 1990s and pessimism became permanent in the minds of most investors. Cundill saw opportunity. Many Japanese firms owned prime urban land acquired decades earlier and carried on the books at very low values. Share prices reflected despair rather than asset reality. Cundill accumulated positions in companies where real estate alone justified the valuation, even before considering the operating business.

He also invested in European property companies during periods of recession and banking stress, particularly when forced selling pushed valuations far below net asset value. These were not leveraged speculative developers. He focused on conservatively financed owners of income producing properties where asset values were temporarily depressed and debt was manageable. Again, survivability mattered more than short term earnings.

In North America, Cundill showed interest in real estate heavy businesses that did not advertise themselves as real estate plays. Retailers with owned store locations. Industrial companies with valuable land and facilities. Hotel companies trading below the value of their properties. In several cases, the real estate provided the margin of safety while the operating business offered upside if conditions improved.

What separated Cundill from many real estate investors was his refusal to romanticize the sector. He was deeply skeptical of leverage and especially wary of property companies dependent on rising prices to justify their capital structures. If the balance sheet relied on optimism, he passed. If the assets could stand on their own under conservative assumptions, he leaned in.

He also understood the optionality embedded in real estate assets. Land appreciates over time. Replacement costs rise. Zoning changes. Urban growth shifts value in ways spreadsheets cannot fully capture. By buying real estate at distressed prices, Cundill allowed time and economic gravity to work in his favor.

In many ways, his real estate investments functioned like deep value call options funded by tangible assets. Downside was protected by land and buildings. Upside came from normalization, redevelopment, or simple recognition of value by the market.

He did not need perfection. He needed patience.

Cundill’s real estate approach reinforces one of the most enduring lessons of his career. The best investments are often hiding in plain sight, buried on balance sheets, ignored because they do not fit the prevailing narrative. When fear dominates and prices disconnect from reality, tangible assets quietly become some of the safest places to take risk.

For investors willing to do the work, Cundill showed that real estate is not about predicting cycles. It is about buying assets for less than they are worth and waiting. As with everything else he did, the edge came not from complexity but from discipline.

Cundill passed away in 2011, leaving behind not only a legendary investing record but a legacy of intellectual generosity and curiosity. He established the largest history writing prize in the world. He supported cultural and philanthropic causes.

He encouraged younger investors to think for themselves and to build a process they could live with even in the darkest markets.

For value investors today, the lessons are as relevant as ever. The world may look more complex, but the basic truths remain the same.

Value tends to hide where no one is looking.

Patience remains the single most underrated competitive advantage in investing. Discipline is the difference between a good idea and a successful long term strategy. A strong balance sheet still matters.

Most of all, temperament continues to outweigh intelligence in every meaningful way.

Peter Cundill lived the life of a man who believed that the world always contains pockets of value waiting for someone patient enough and determined enough to find them. He never gave up on that idea. His message to all of us could not be clearer. Keep looking. Keep thinking. Keep digging.

There is always something to do.

PS For readers who want to go deeper into Peter Cundill’s thinking and life, Christopher Risso Gill’s two books are essential. There’s Always Something to Do is the cornerstone. It draws directly from Cundill’s personal journals and investment notes, offering an unusually intimate look at how he analyzed businesses, managed risk, and maintained discipline through decades of market cycles. The second book, Routines and Orgies: The Life of Peter Cundill, Financial Genius, Philosopher, and Philanthropist, expands the lens beyond investing to capture the full scope of Cundill’s personality and passions. It explores the routines that anchored his discipline and the exuberance with which he embraced life outside the markets. Together, the books reveal not just a great investor, but a deeply curious and fully engaged human being whose approach to markets was inseparable from how he lived.