Monday, March 25, 2013

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 saleand 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.

Jeff Matthews
Author “Warren Buffett’s Successor: Who It Is And Why It Matters”
(eBooks on Investing, 2013)    $2.99 Kindle Version at

© 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.


fivetonsflax said...

Condolences on your loss. This is a sweet eulogy.

Colin P said...

Nice story.

Rich said...

Sorry to hear about the loss you and your family suffered, Jeff.

Anonymous said...


wren miller said...

Curious if he bought any financial stocks.....JPM during the whale crisis? BAC at $5?

Jeff Matthews said...

He'd been ill. We didn't talk about the market.

Anonymous said...

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%!

John said...

Sorry for your loss Jeff.

Tim Wright said...

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.

Anonymous said...

This post goes into the permanent file along with Jeff's best ever "Think For Yourself".

Some people just get it.

Wonderful story.

Bruce said...

Lovely fable with many lessons ..& true to boot!

thanks JM

Don Ake said...

This strategy is very close to my grandfather's -

Anonymous said...

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

Anonymous said...

Heartwarming story rich with feeling and offering timetest advice -- anonymous

Anonymous said...

to the commenter above - yes the 1% do need the 99% to be sheeple in order for the 1% to prosper - twas ever thus

matjone said...

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.