Value Line fires its legendary investment brain

An employee who often fought with departed Value Line Chief Jean Bernhard Buttner has been told to retire.
For 63 years, Samuel Eisenstadt was probably Value Line Inc.’s most valued employee. The statistician created an investment strategy that proved successful for decades and was endorsed by none other than Warren Buffett. But today he embarks on something new—unemployment.
Late last Friday afternoon, the firm’s new chief executive, Howard Brecher, called Mr. Eisenstadt and told him that his services were “no longer needed” and he was retiring, effective immediately, according to Mr. Eisenstadt. Yet the 87-year-old, who helped drive the Nazis out of France and Belgium as a member of the U.S Army’s 8th Armored Division, was in no mood to be shoved aside.
“I refuse to accept the explanation that I’m retiring,” Mr. Eisenstadt said. “I’m not retiring, and I don’t plan to retire. My mind is still sharp and wrapped up in my work. This is a very sad ending, and it really hurts.”
A spokesman said Value Line wouldn’t comment on personnel matters.
The end of Mr. Eisenstadt’s career comes at a time of turmoil for Value Line, publisher of the Value Line Investment Survey and other newsletters. On Nov. 4, CEO Jean Bernhard Buttner was forced outafter 21 years at the helm when the Securities and Exchange Commission determined that under her watch the firm had defrauded customers for nearly 20 years by overcharging them for mutual fund trades. Value Line agreed to nearly $45 million in penalties, and Mrs. Buttner, who controls an 86.5% stake, was barred from running the company and ordered to give up control of it within a year.
Mr. Eisenstadt, who once had the title of research chairman and a seat on Value Line’s board of directors, cited frequent clashes with Mrs. Buttner. He said she resented the favorable publicity he garnered for inventing Value Line’s investment strategy while he worked for her father, Value Line founder Arnold Bernhard, who passed away in 1987. The investment strategy rated stocks based on earnings growth, debt levels, price momentum and other factors. Mr. Buffett once said, “I don’t know of any other system that’s as good.”
Years ago, according to Mr. Eisenstadt, he was invited to appear on Louis Rukeyser’s Wall Street Week on PBS to talk about Value Line’s approach to investing, but Mrs. Buttner refused to let him go unless Mr. Rukeyser promised to credit her father as the inventor of the Value Line strategy and to submit questions to her in advance. Mr. Rukeyser refused on both counts and Mrs. Buttner backed down after Mr. Eisenstadt threatened to quit. But she was adamant that he not appear on ABC’s 20/20 to debate Burton Malkiel, author of the investment classic A Random Walk Down Wall Street, although Mr. Eisenstadt argued at the time that she was passing up a great chance to promote Value Line to a wider audience.
In recent years, relations between the scion and the veteran employee worsened, Mr. Eisenstadt said. His workdays were cut to two per week from five, and he was stripped of his board seat and his title of senior vice president. His pay was cut by 60%, he was taken off the company health insurance plan and forced to buy coverage via COBRA.
“She was trying to make life so difficult that I would leave,” said Mr. Eisenstadt, who was hired by Mr. Bernhard in 1946 as a proofreader after he was discharged from the army.
In the end, Mr. Eisenstadt lasted a month longer than Mrs. Buttner. Although there has been an SEC-forced regime change at Value Line, Mr. Eisenstadt said Mrs. Buttner remains firmly in charge and regularly phones in her orders to Mr. Brecher, her former lawyer.
Mr. Eisenstadt would like to continue working as a consultant. “I can still contribute,” he said.

Aaron Elstein is a reporter for sister publication Crain’s New York Business.