Author Topic: 'An Optometrist Who Beat The Odds To Become A Billionaire'  (Read 10834 times)

Liberty

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'An Optometrist Who Beat The Odds To Become A Billionaire'
« on: February 19, 2019, 08:30:33 AM »
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/#a76196b22e8a

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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.

“My thing is,” Wertheim says as he reflects on his long career, “I wanted to be able to have free time. To me, having time is the most precious thing.” [...]

“You take what you earn with the sweat of your brow, then you take a percentage of that and you invest it in other people’s labor,” Wertheim says of his near-religious devotion to tithing his wages into the stock market. [...]

A CPA by training, Mendelson was a successful real estate investor who had studied at Columbia Business School under David Dodd, co-author with Benjamin Graham of the seminal book on value investing, Security Analysis.  [...]

Today, Heico trades for $80, and buy-and-hold Herbie is its largest individual shareholder. His original $5 million investment is worth more than $800 million. [...]

A signee of Bill Gates and Warren Buffett’s Giving Pledge, Wertheim has committed to giving away at least half his wealth, and he intends the bulk of the donations to go to public education—the very system of which he is a product.
« Last Edit: February 19, 2019, 09:05:03 AM by Liberty »
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Munger_Disciple

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #1 on: February 19, 2019, 09:20:25 AM »
Very interesting story. Two tidbits are interesting : he has had a "steady income of $10M a year" for many years, and Heiko is a home run (gone up 160x).

cherzeca

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #2 on: February 19, 2019, 09:55:22 AM »
Very interesting story. Two tidbits are interesting : he has had a "steady income of $10M a year" for many years, and Heiko is a home run (gone up 160x).

buying GE at these prices for the patent portfolio struck me as surprising.  I wouldn't have thought that provided a margin of safety. 

Liberty

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #3 on: February 19, 2019, 10:20:29 AM »
Very interesting story. Two tidbits are interesting : he has had a "steady income of $10M a year" for many years, and Heiko is a home run (gone up 160x).

There's one part that seems to be contradictory, saying he likes to double down when the price goes down, and then it says he tends to sell when a position goes 25% against him. I'm guessing this is the journalist not explaining his reasoning fully (he sells if something happens to make him lose confidence and it moves by more than 25%, maybe? and if he remains confident, he doubles down).

He's certainly a nice rags to riches story, boostrapping himself from dunce-cap dyslexic with abusive father, forced to go into the navy by a judge to inventor and investor billionaire.
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stahleyp

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #4 on: February 19, 2019, 12:42:58 PM »
I wonder how good is returns actually are. If he lost $50 million in 1982 he has probably done about as well as the market (if not worse). With that said if I'm anywhere close to that when I'm his age, I'll be happy (whether or not I beat the S&P 500).

I am super sleep deprived (baby is teething) but here's my math. I'm even being pretty generous and assuming he "only" had $50 million total in 1981 (I'm assuming he had more than that if he lost $50 million in 1982). Granted...if he had $50 million and then lost it all the math doesn't work.

Turning $50 million into $2.3 billion after 37 years is about a 10.9% return. From my calculation the S&P 500 (before taxes) earned 11.15% from 1/1/81 to 12/31/18. Obviously, this doesn't include his charitable contributions or additional investments from his income or his expenses.
 
« Last Edit: February 19, 2019, 12:44:52 PM by stahleyp »
Paul

rkbabang

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #5 on: February 19, 2019, 12:54:12 PM »
He's had "steady" $10M per year income for a lot of years.  If 30 years then that is "$300 M", let's say he invested $8M/year that is $240 M.  The article says that he turned $5M into $800M in Heiko alone, add in that other $235M with no returns at all and he is a Billionaire.  And he did get returns on that other money because he owns a lot of Apple and Microsoft, etc.  It sounds like he did well even without the Heiko, but that was his big hit.

Liberty

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #6 on: February 19, 2019, 01:15:29 PM »
He's had "steady" $10M per year income for a lot of years.  If 30 years then that is "$300 M", let's say he invested $8M/year that is $240 M.  The article says that he turned $5M into $800M in Heiko alone, add in that other $235M with no returns at all and he is a Billionaire.  And he did get returns on that other money because he owns a lot of Apple and Microsoft, etc.  It sounds like he did well even without the Heiko, but that was his big hit.

They put his net worth at $2.3bn. And the assumption that he made 10m/year for 30 years might not be correct, it could be a lot shorter than that.

They say he bought MSFT at IPO and held it since then, so his returns there are certainly pretty good. He might just have put less than he put into HEI.
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Gregmal

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #7 on: February 19, 2019, 01:20:06 PM »
These are always cool and all, and I certainly don't mind the reading, but I've yet to see a real one that the average Joe can look at and dream about. Beating the odds would be having a $10M income, regardless of what he does with it. Show me a guy would turned a $50-$100K salary into mid 7 or 8 figures. Thats impressive. Its like all those "Guy With 200K In Student Loans Got Debt Free" stories. Then you find out he and his wife made $15K a month a lived in a 600 sq ft house in Pennsylvania or with their parents...

rkbabang

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #8 on: February 19, 2019, 01:27:11 PM »
These are always cool and all, and I certainly don't mind the reading, but I've yet to see a real one that the average Joe can look at and dream about. Beating the odds would be having a $10M income, regardless of what he does with it. Show me a guy would turned a $50-$100K salary into mid 7 or 8 figures. Thats impressive. Its like all those "Guy With 200K In Student Loans Got Debt Free" stories. Then you find out he and his wife made $15K a month a lived in a 600 sq ft house in Pennsylvania or with their parents...

Yes the headline is misleading and clickbatish.  Calling him "An optometrist" makes it sound like he makes a few hundred grand per year, not 8 figures.  It should be "Successful Inventor Who Beat The Odds To Become A Billionaire"  It doesn't sound as amazing, but it is still a good story, because his investing performance is still excellent.   And anyone who invested in both the Apple IPO and Microsoft IPO and held until now would have done pretty damn well even with modest amounts.

Munger_Disciple

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Re: 'An Optometrist Who Beat The Odds To Become A Billionaire'
« Reply #9 on: February 19, 2019, 01:53:56 PM »
So, I have done the math with the following assumptions: (1) He had $50M in 1981 and (2) added $8M per year to the account since 1981.

The resulting CAGR is 7.4%, compounded over 38 years to get $2.3B.