The Best Stock-Picker I Ever Knew
The best stock-picker I ever knew died last 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.
In fact, he still used a rotary phone in his 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.
When he found that thing he liked to see—and 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.
What, exactly, was the thing he was looking for?
It was simple: it was a high dividend yield in 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.
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.
Idea-for-idea, Norman was the best 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.
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.
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.
We all miss him.
Author “Warren Buffett’s Successor: Who It Is And Why It Matters”
(eBooks on Investing, 2013) $2.99 Kindle Version at Amazon.com
© 2013 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.