Secrets Of The Greatest Investor You’ve Never Heard Of
One of the hardest parts of investing (and there are many) is patience.
It’s all too easy to get caught up in the short-term swings of our holdings. But in times like these, we must remind ourselves that there will always be another deal. Don’t jump into an investment because you’re being pressured into it or think this is your only opportunity. If you don’t feel comfortable or haven’t done your due diligence, take a step back and take a fresh approach.
Think of the patience that Warren Buffett has. Over his lifetime, the Oracle of Omaha has seen his fair share of market plunges and losses. When Kraft-Heinz (Nasdaq: KHC) tanked in late February 2018, for example, his company, Berkshire Hathaway (NYSE: BRK), lost about $4.3 billion… in a single day. Yet, Buffett remains steadfast in his investments. He knows that when he purchases a wonderful company, he can hold onto it “forever.”
It will be interesting to see the headlines that come out of Omaha this weekend at Berkshire’s annual shareholder meeting. It will be a “virtual” event, truly unprecedented in these times, thanks to the Covid-19 pandemic.
But you don’t have to wait for Saturday to learn from Buffett. He’s clearly laid out his investment philosophy in his shareholder letters… buy great companies at fair prices and let compounding (and American ingenuity) go to work for you.
His investment guidelines are so simple, yet it’s been difficult for others to replicate them. When we hear his investing philosophies and advice, we tend to shrug it off. It’s been repeated so many times that it’s lost its allure.
But one regular individual is living, walking proof that Buffett’s simplistic approach to investing works.
In fact, it’s helped this gentleman become a self-made billionaire.
The Greatest Investor You’ve Never Heard Of
You’ve likely never heard of Herb Wertheim. But he’s a self-made billionaire with a net worth of roughly $2.3 billion. His story reminds us that regular folks with patience and discipline can generate Buffett-like results.
Wertheim’s secrets? Buy quality companies with good management; add to the position if the stock price drops, and hold for the long term to capture the magic of compounding.
Sound familiar? It should. That’s Buffett’s exact approach.
Forbes published an excellent article on Wertheim, which you can read here.
Here’s an excerpt…
Wertheim, 79, has no need for early-bird specials. What the photos don’t reveal is that Dr. Herbie, as he is known to friends, is a self-made billionaire worth $2.3 billion by Forbes’ reckoning—not including the $100 million he has donated to Florida’s public universities. His fortune comes not from some flash of entrepreneurial brilliance or dogged devotion to career, but from a lifetime of prudent do-it-yourself buy-and-hold investing.
Herb Wertheim may be the greatest individual investor the world has never heard of, and he has the Fidelity statements to prove it. Leafing through printouts he has brought to a meeting, you can see hundreds of millions of dollars in stocks like Apple and Microsoft, purchased decades ago during their IPOs. An $800 million-plus position in Heico, a $1.8 billion (revenue) airplane-parts manufacturer, dates to 1992. There are dozens of other holdings, ranging from GE and Google to BP and Bank of America. If there’s a common theme to Wertheim’s investing, it’s a preference for industry and technology companies and dividend payers. His financial success—and the fantastic life his portfolio has afforded his family—is a testament to the power of compounding as well as to the resilience of American innovation over the half-century.
We Can Replicate This Success
Pretty amazing stuff. And while Wertheim may be a more extreme example, the simplicity of his approach is something we can all mimic. In fact, some of the best investments in my Top Stock Advisor premium service have come from well-known, profitable companies that generate enormous amounts of cash flow. We’ve picked many of these stocks up at reasonable prices and have done well.
For example, we scooped up shares of American Express (NYSE: AXP) after the stock sold off on news of its breakup with Costco (Nasdaq: COST). Shares were trading at a 16% discount on a price-to-earnings basis compared to its historical five-year average, and only trading for seven times cash earnings (as measured by its earnings before interest, taxes, depreciation and amortization, or EBITDA).
Great company, great brand, gushes cash flow, and we bought shares at a great price. Since then we’re up 54%, compared to the S&P 500’s 35%. Not only that, but it’s held up much better during the recent coronavirus-related selloff.
Action To Take
The point is, investing doesn’t have to be complicated. So don’t make it complicated. Sometimes the best investments are the obvious ones. Sure, you can get cute and take a flyer on some hyped-up IPO or fly-by-night small cap, which makes for fun talk at your backyard BBQs. But the odds are that’s all it will provide you.
Simply find great companies, buy them at fair prices, and remain patient. It pays off. In fact, times of crisis (like the Covid-19 pandemic right now) are some of the best times to strike.
P.S. My colleague Nathan Slaughter just wrapped up an emergency briefing, unveiling what investors need to know to survive (and thrive) during the Covid-19 pandemic.
Just like I mentioned with being patient and striking when other investors are panicking, Nathan has identified the perfect group of stocks to own in a crisis market. In fact, he’s found 320%… 256%… even 760% gains… from REGULAR stocks, in 24 hours or less…
He calls them “Predator” trades — and he’s developed a simple 6-part profit screen to detect these big trade events before they happen.