Most investors have heard of Warren Buffett, Peter Lynch and Sir John Templeton, but what about Herbert Wertheim? Dr. Wertheim is worth $2.3 billion according to Forbes. In a recent Forbes Magazine article, he credits his substantial wealth to buying individual stocks and holding them forever. Dr. Wertheim said, “My goal is to buy and almost never sell.”[1]

His strategy follows the tracks of Messrs. Buffett and Lynch of owning great companies and holding them for years. His two largest holdings are Apple and Microsoft “purchased decades ago during their IPOs.”

Apple and Microsoft look like no-brainers today, but these industry titans suffered mightily on their way to greatness.  Since 1980, Apple has suffered 14 calendar year losses. In 2000, it fell 71% followed by a 57% drop in 2008.  If you purchased Apple in 1980 and held it through 1997 you made $8. Would you have held it for 17 years only to make $8?[2]

Microsoft stock fell 63% in 2000, 22% in 2002, and 45% in 2008. If you purchased Microsoft in January 2000, you had to wait until November 2015 before it traded above your purchase price.[3]

Dr. Wertheim is an optometrist by training and is keen on understanding patents. He put his knowledge to work when he discovered a “small airline-parts maker” by the name of Heico. At the time of his discovery it was trading for 33 cents per share.  At the time of his purchase “Heico was a disaster.” However, he understood what needed to be done to make the company better. His original investment of $5 million is now worth $800 million![4]

How can we benefit from Dr. Wertheim’s insight?

• Buy companies and investments you know – a classic Peter Lynch move. In addition, make sure you understand what you’re buying. If you can’t explain what a company does to others, don’t buy it.
• Apply courage and fortitude as needed. During the dark trading days of Apple and Microsoft, he held on to the stocks. He did not panic and sell his holdings. He adds, “If a stock continues to go down, and you believe in it and did your research, then you buy more.”
• Buy and hold. If you own good investments, then hold them forever. Trying to time the market based on economic indicators, price levels, or expert opinions is folly.
• Give your money away. Dr. Wertheim and his wife Nicole have pledged to give half their wealth away to groups and organizations they support. In fact, they have signed the Bill Gates and Warren Buffett Giving Pledge.
• Enjoy your life. He and his wife travel often and enjoy the gift of time. According to Dr. Wertheim, “Having time is the most precious thing.”

His story is one of rags to riches and worth a read. You probably won’t become a billionaire, but you may pick up a few extra dollars by following the lead of great investors like Dr. Wertheim.

Humble yourselves before the Lord, and he will exalt you. ~ James 4:10

February 21, 2019

Bill Parrott is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.

 

 

 

 

[1] https://www.forbes.com/sites/maddieberg/2019/02/19/the-greatest-investor-youve-never-heard-of-an-optometrist-who-beat-the-odds-to-become-a-billionaire/#7e309eb722e8, By Madeline Berg, 2/19/2019.

[2] Morningstar Office Hypothetical.

[3] Ibid

[4] https://www.forbes.com/sites/maddieberg/2019/02/19/the-greatest-investor-youve-never-heard-of-an-optometrist-who-beat-the-odds-to-become-a-billionaire/#7e309eb722e8, By Madeline Berg, 2/19/2019.