Yes, It Is That Simple

It’s palm trees and lapping waves for the Ward family this Christmas.

I’m writing to you from a vacation rental in Key West. There might be more beautiful places in the world… but I can’t think of any right now.

If you’ve never been, it’s a fun town…

A kingdom unto itself, Key West exists on a tiny spit of land at the end of the world (or at least the continental U.S.). The locals are quirky. The vibe is laid back. The pedestrians might have some place they need to be, but as they stroll alongside wild roosters who roam the sidewalks, they’re in no hurry to get there.

Every evening, the sun sets on Mallory Square as the street performers try to draw a crowd. Tourists buy a cigar from Rodriguez Cigar Factory and swear it’s as good as the Cubans. Live music is everywhere and the crowds cheer when the sun sinks beneath the watery horizon.

During the day, our kids dig in the sand. At night, I push a stroller down Duval. We pass old haunts like Hog’s Breath Saloon and Sloppy Joe’s, an old hangout for Ernest Hemingway.

I’m not a novelist, but I am a writer. So, I stop by “Papa’s” statue to pay my respects.

Yes, this is an investing letter, and I promise we’re getting to that. Over coffee this morning, I spot a headline…

The Gronk and the Oracle of Omaha

“Rob Gronkowski scored big with a $69,000 bet on Apple stock – how his strategy mirrors Warren Buffett’s,” it reads.

If you don’t know, Rob Gronkowski – or “Gronk" – is a former NFL tight end. A teammate of Tom Brady at New England and Tampa, he has four Super Bowl rings. And his goofball antics made him a bit of a cult hero among football fanatics.

But, as it turns out, Gronk lived rather frugally… and is a great investor.

He never touched his game checks, the story reads. Those went into savings. He only spent the checks he received from advertisement deals. So, throughout his career – like so many Americans – Gronk lived below his means, saved heavily, and best of all, according to the story, made long-term investments into high-quality dividend growth stocks.

As it turns out, in 2014, Gronkowski bought Apple (AAPL) shares.

He says that he’s sold some, but still owns many shares… currently his stake is worth north of $600,000.

Apple shares are up by nearly 800% during the last decade. And with dividend reinvestment factored into the equation, AAPL’s 10-year total return compound annual growth rate of 28% doubles the S&P 500’s of 14%.

Gronk’s patience has paid off nicely with that one…

Warren Buffett didn’t start buying Apple until 2016. Buffett owned more shares. At its peak, Berkshire Hathaway’s AAPL position was worth nearly $200 billion. He, too, made out like a bandit, buying a wonderful company like Apple nearly 10 years ago at attractive prices and holding the share as they rallied.

So, in some sense, Gronk beat the Oracle of Omaha. Wonders never cease…

But that’s precisely the point. You don’t have to be Warren Buffett to see fabulous returns. Regular people have been doing it for years.

It Can Be Easy

Anne Scheiber worked for the IRS until she retired in 1951. She never received a promotion. And she never made more than $4,000 per year. And yet, she built a fortune worth more than $20 million.

Scheiber lived a long time (104 years) and invested in well-known companies, such as PepsiCo and Pfizer, over the long term. When she died in 1995 her lawyer said, “She ran rings around Warren Buffett.”

William Fay, her broker, told the New York Times, “She was never looking for a quick buck. Her whole idea was to get performance on a long-term basis. She felt over the long run the value would grow.”

And grow it did… into a portfolio that allowed her to collect more than $500,000 per year in dividends.

Sylvia Bloom was a poor child of immigrants who lived through the Great Depression, but she died a self-made millionaire.

She worked as a secretary for a New York law firm for 67 years. Her salary was never much, but as the story goes, when Bloom heard about her bosses making stock purchases, she’d often follow them into the positions (albeit, making much smaller purchases due to her relatively meager salary).

Bloom wasn’t a sophisticated investor. She simply bought and held onto high-quality companies which enabled her to amass an $8.2 million fortune, live a comfortable retirement, and to donate $6.24 million to charity upon her death.

And then there’s Ronald Reed. I love his story.

He was known for wearing flannel shirts. He drove a second-hand Toyota. And his biggest pastime was collecting fallen branches and chopping wood to use to fuel his wood stove.

Reed was the first person from his family to graduate from high school. He served in the United States armed forces during World War II, fighting in North Africa, Italy, and in the Pacific Theater.

After returning home from the war, he worked as a gas station attendant and later as a janitor at his local JCPenney.

He also became a millionaire…

He lived below his means. And he read The Wall Street Journal every day, saved diligently for decades, and allocated his money towards blue-chip stocks.

The same Wall Street Journal reported that he held 95 individual stocks at the time of his death, any for decades.

They’d be companies you’d recognize: Procter & Gamble (PG), JPMorgan Chase (JPM), General Electric (GE), Dow Chemical (DOW), J.M. Smucker (SJM), and Johnson & Johnson (JNJ).

Reed turned his middle-class salary into a nest egg worth nearly $10 million.

Upon his death, Reed donated roughly $6 million dollars to the Brooks Memorial Library and the Brattleboro Memorial Hospital, turning him into a local legend.

Reed’s story – like Scheiber’s and Bloom’s – is a testament to what we believe here at Wide Moat Research.

I’ve said it before. And I’ll say it again…

You Can Believe It

Too often, investors want a shortcut. They want a “hack.” They want highly leveraged derivatives… obscure cryptocurrencies… meme stocks that “go to the moon.”

I mean… you can try those things. But you don’t have to.

You don’t have to speculate… or gamble… to amass millions.

Live below your means. Buy high-quality companies at fair (or better) prices, and patiently hold them for long periods of time.

That’s what we believe at Wide Moat Research. And if you’re reading this, I hope you believe it, too. It’s not always easy. But it is that simple. And don’t worry, we’ll be here to help you every step of the way.

Oh, and on behalf of the Ward family, Merry Christmas and Happy Holidays.

Regards,

Nick Ward
Analyst, Wide Moat Research