The best stock-picker I ever knew died last
week.
week.
You never heard of him. He did not yack about his picks in Barron’s annual Roundtable or chat up his latest buy with the talking heads on CNBC, and he
certainly wasn’t posting anything on message boards—he actually didn’t use a
computer.
certainly wasn’t posting anything on message boards—he actually didn’t use a
computer.
In fact, he still used a rotary phone in his
house.
house.
The way he picked stocks was also from the
dark ages: he combed the stock tables in the Wall Street Journal, looking for a
very specific thing he liked to see in a stock.
dark ages: he combed the stock tables in the Wall Street Journal, looking for a
very specific thing he liked to see in a stock.
When he found that thing he liked to see—and
only when he found that thing—he bought the stock.
only when he found that thing—he bought the stock.
And he never sold it.
So when he died last week, he was sitting on a
portfolio of stocks like ExxonMobil, Altria (the old Phillip Morris), Verizon,
and all kinds of blue-chip stocks that your average CNBC stock promoter doesn’t
much care for, at cost-bases that would make your head spin, with dividend
income that paid for the houses and antiques and gee-gaws and other things he collected besides stocks.
portfolio of stocks like ExxonMobil, Altria (the old Phillip Morris), Verizon,
and all kinds of blue-chip stocks that your average CNBC stock promoter doesn’t
much care for, at cost-bases that would make your head spin, with dividend
income that paid for the houses and antiques and gee-gaws and other things he collected besides stocks.
What, exactly, was the thing he was looking
for?
for?
It was simple: it was a high dividend yield in
a company that had a long track record of paying good dividends.
a company that had a long track record of paying good dividends.
By buying companies with safe, high dividend
yields, Norman assured himself of getting only companies that had solid
financial characteristics (after all, they couldn’t have been paying dividends
for many years without a good underlying business model and strong cash flow),
at prices that were usually—in hindsight—ridiculously cheap, because Norman
generally bought them during a hysteria that was causing Mr. Market to offer
that particular stock at a particularly attractive price.
Picky as he was, Norman bought maybe one new stock every year or two, at most. (He made Warren Buffett look like a day-trader.) And he was loyal to his investments: he never, ever sold.
yields, Norman assured himself of getting only companies that had solid
financial characteristics (after all, they couldn’t have been paying dividends
for many years without a good underlying business model and strong cash flow),
at prices that were usually—in hindsight—ridiculously cheap, because Norman
generally bought them during a hysteria that was causing Mr. Market to offer
that particular stock at a particularly attractive price.
Picky as he was, Norman bought maybe one new stock every year or two, at most. (He made Warren Buffett look like a day-trader.) And he was loyal to his investments: he never, ever sold.
He bought what is now Altria back when the
government was trying to put Phillip Morris out of business around 2003-4 and
the stock was being given away. He
bought Mobil back during the market collapse in 1987, when everything was being
given away. And he bought things that
became Verizon back before Verizon became Verizon, when those things were being
given away because nobody understood who needed a regional phone company in
their investment portfolio.
government was trying to put Phillip Morris out of business around 2003-4 and
the stock was being given away. He
bought Mobil back during the market collapse in 1987, when everything was being
given away. And he bought things that
became Verizon back before Verizon became Verizon, when those things were being
given away because nobody understood who needed a regional phone company in
their investment portfolio.
Idea-for-idea, Norman was the best
stock-picker I have ever known: he almost never bought a clunker.
stock-picker I have ever known: he almost never bought a clunker.
But he was more than a stock-picker. He bought houses the way he bought stocks—when
they were on sale—and he rented them to people who often became his friends, like we did.
And he bought the
antiques and gee-gaws that eventually filled almost every square inch of his
house and garage the way he bought stocks and houses, although he splurged a
little on objects of great beauty, because, at the end of the day, he saw
beauty where others didn’t.
they were on sale—and he rented them to people who often became his friends, like we did.
And he bought the
antiques and gee-gaws that eventually filled almost every square inch of his
house and garage the way he bought stocks and houses, although he splurged a
little on objects of great beauty, because, at the end of the day, he saw
beauty where others didn’t.
Now that I think about it, Norman picked his
friends the same way he picked stocks (and bonds) and antiques and gee-gaws,
and like those stocks (and bonds) and antiques and gee-gaws that he bought and
never, ever sold, Norman kept his friends all his life, and they stayed with
him in return.
friends the same way he picked stocks (and bonds) and antiques and gee-gaws,
and like those stocks (and bonds) and antiques and gee-gaws that he bought and
never, ever sold, Norman kept his friends all his life, and they stayed with
him in return.
Our daughters first met him long ago in a dark
Victorian living room with dim lighting and old furniture and a fire in the
fireplace and hot tea on the coffee table even though they were too young to
drink tea (although they did eat the biscuits he set out), and despite the fact they only saw Norman a few times after we moved away from next door to him (“away” being three blocks, which was still too far away for Norman), they miss him.
Victorian living room with dim lighting and old furniture and a fire in the
fireplace and hot tea on the coffee table even though they were too young to
drink tea (although they did eat the biscuits he set out), and despite the fact they only saw Norman a few times after we moved away from next door to him (“away” being three blocks, which was still too far away for Norman), they miss him.
We all miss him.
Jeff Matthews
Author “Warren Buffett’s Successor: Who It Is And Why It Matters”
(eBooks on Investing, 2013) $2.99
Kindle Version at Amazon.com
Kindle Version at Amazon.com
© 2013
NotMakingThisUp, LLC
NotMakingThisUp, LLC
The
content contained in this blog represents only the opinions of Mr.
Matthews. Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations. This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever.
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored. And if you
think Mr. Matthews is kidding about that, he is not. The content herein is intended solely for the
entertainment of the reader, and the author.
content contained in this blog represents only the opinions of Mr.
Matthews. Mr. Matthews also acts as an
advisor and clients advised by Mr. Matthews may hold either long or short
positions in securities of various companies discussed in the blog based upon
Mr. Matthews’ recommendations. This
commentary in no way constitutes investment advice, and should never be relied
on in making an investment decision, ever.
Also, this blog is not a solicitation of business by Mr. Matthews: all
inquiries will be ignored. And if you
think Mr. Matthews is kidding about that, he is not. The content herein is intended solely for the
entertainment of the reader, and the author.
16 replies on “The Best Stock-Picker I Ever Knew”
Condolences on your loss. This is a sweet eulogy.
Nice story.
Sorry to hear about the loss you and your family suffered, Jeff.
Beautiful.
Curious if he bought any financial stocks…..JPM during the whale crisis? BAC at $5?
He'd been ill. We didn't talk about the market.
I am sorry to year you lost a great friend.
What I find curious, is that you present many such examples to people–making it obvious the way an investor will act–and maybe 99% of investors admit it's a good idea and won't do it. I guess for long-term investors, we need that crazy 99%!
Sorry for your loss Jeff.
my mother invested the same way. A girl who never went to college, came off the dairy farm, educated herself in the local library. And bought dividend stocks like oils and telephones and saved every penny reinvesting it. And got very rich.
This post goes into the permanent file along with Jeff's best ever "Think For Yourself".
Some people just get it.
Wonderful story.
Lovely fable with many lessons ..& true to boot!
thanks JM
This strategy is very close to my grandfather's – http://modeltstocktrends.blogspot.com/2011/06/by-george-i-think-he-got-it-right.html
heart warming story for an investor. my grandpa had he's own story. driving a subway car for the CTA in chicago, he just bought walgreen's for 40 years, amassing a multi million stake, and nobody in the family knew about it. during this time walgreen's was among the best performing stocks. there are plenty of quiet investors out there who knock the cover off the ball
Heartwarming story rich with feeling and offering timetest advice — anonymous
to the commenter above – yes the 1% do need the 99% to be sheeple in order for the 1% to prosper – twas ever thus
I just found this post and am interested and would like to hear more about this guy's investing approach. I am not sure you'll see this post. But if you do maybe you can answer some questions.
How did he decide the dividend was high enough? Some edge over treasuries? Or just some fixed number?
How about the houses? Was there some specific multiple of rent he liked? What other criteria did he look at? Did he go for a specific type of house, or age, neighborhood, etc.?
In any event thanks for this writeup.