'An Optometrist Who Beat The Odds To Become A Billionaire'

[Liberty]

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

 

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.

[Munger_Disciple]

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).

[Guest cherzeca]

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]

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.

[Guest]

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.

 

[rkbabang]

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]

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.

[Gregmal]

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]

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]

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.

[Parsad]

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.

 

You guys are jackasses!  ;D  Here you have a man who was an optometrist, built up a company and then took the cash flow and invested it over time.  It doesn't really matter what his results were like...he could be conservative or he could have shot the lights out.  The main point is that he took a career and became entrepeneurial, and then through long-term investments built enormous wealth...that's it! 

 

Who give a rat's ass what CAGR he was compounding at?  He wasn't going for the title of greatest investor of all time...just that people can achieve tremendous success by doing some simple things...even if you only achieve 1/100th of what he did in terms of wealth, you would be well off copying his behavior.  Cheers!

[nickenumbers]

Amen!  Parsad and I are OUT!

 

 

[Guest]

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.

 

You guys are jackasses!  ;D  Here you have a man who was an optometrist, built up a company and then took the cash flow and invested it over time.  It doesn't really matter what his results were like...he could be conservative or he could have shot the lights out.  The main point is that he took a career and became entrepeneurial, and then through long-term investments built enormous wealth...that's it! 

 

Who give a rat's ass what CAGR he was compounding at?  He wasn't going for the title of greatest investor of all time...just that people can achieve tremendous success by doing some simple things...even if you only achieve 1/100th of what he did in terms of wealth, you would be well off copying his behavior.  Cheers!

 

Well, Sanj, according to the article he is "the greatest investor you've never heard of." ;) Usually that implies market beating returns. I'll wager that he would probably have been just as well off (if not better) by indexing. I'll admit, having $50 million plus in 1981 during that terrible economy in his early 40s is really quite impressive.  He was probably doing better than Buffett at each of their 42 years.

 

Like i said, if I end up as wealthy as him (granted, that's a very, very big if) I'll be happy with my winnings.

[Orchard]

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.

Why exclude BPI?

 

The guy got to $2.3B entirely through investing. Why would you ignore the investment that started it all? Because BPI doesn't have a ticker it doesn't count?

 

Clearly his major coup was getting his first millions not what happened afterwards although Heico and the other investments are still great.

[Munger_Disciple]

 

 

Who give a rat's ass what CAGR he was compounding at?

 

Sanjeev,

 

I am going to ignore the jackasses comment. But seriously no one is arguing the guy is a great entrepreneur & all. My issue is with the uncritical reporting. Just wanted to show that the reporter hasn't really done her "homework" when she was using phrases like greatest investor etc.

 

MD

[Munger_Disciple]

Why exclude BPI?

 

You have to use something as a starting point. Otherwise return would be infinite because he like many on this board started with 0.

[Spekulatius]

The article is more about the wonders of compounding than anything.

[CorpRaider]

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...

 

Sounds like the ones about the janitor or the IRS mid level auditor will scratch your itch.

[Liberty]

Parsad is right.

 

Too many of you try way too hard to miss the point of these things just to complain and whine.  I don't care that the journalist put all kinds of flourishes on it and called him whatever. This isn't the important part; can't you tell what's important and what isn't? Look at the life and the process and the principles. And it's possible to appreciate what someone else has done without caring that not everybody can do the same or whatever. Others successes never being good enough and pure enough and done the way you'd want is disguised jealousy... It's not supposed to be easy to replicate, it's about celebrating someone's success.

 

And trying to create some math to show it's not that impressive. Give me a break. There are lots of entrepreneurs making a few milions a year that will never have a net worth much above a few tens of millions. Trump inherited hundreds of millions and I'm pretty sure this guy is richer than him (esp if you remove the fuzzy brand value) starting from zero. It's very impressive. Most here have trouble holding a stock more than a couple years or without selling a bunch if it doubles...

 

[bizaro86]

Most here have trouble holding a stock more than a couple years or without selling a bunch if it doubles...

 

That's the part I find the most impressive. I've had a couple of doubles where I sold the vast majority of  my position after a double, and then watched it double again (or twice, in one case) on small positions. I'm trying very hard to not do that anymore on quality stocks...

 

 

[Munger_Disciple]

I am very impressed by what the guy achieved especially given where he started from. He is an inspiration to any aspiring young entrepreneur. I also agree that the most impressive thing about his investing is how long he held investments.  Plus he seems like a very generous fellow and I admire this quality about him.

 

A major portion of the Forbes article is about his stock market investments. For instance, there was a discussion on how he took on some margin debt to buy dividend stocks and strategies he used to take tax losses, in addition to success in finding and investing very early in Heiko. I did the math just for my own understanding of the underlying returns and not to take anything away from his accomplishments. I then decided to share what I found because I thought it was interesting. I am frankly surprised by some of the reaction to my post and find it bizarre. It is normal that people can have differing opinions of the same article. However we can agree to disagree respectfully.

 

Anyhow this will be my last post on this topic.

[Guest]

For one, I'm pretty sure Sanj was just kidding around by calling us "jackasses."  He had his grin there and I shot back with a wink so I think it was all in good fun.

 

 

Liberty,

 

His overall story is quite impressive. I don't see anyone doubting that. However, his investment returns are not (which is what the article is trying to convince us of). We're not "creating math" to show otherwise. That's certainly looks to be the cased on what we can tell. The story is trying to convince us that he's a great investor. We have no evidence to believe that he is. Do you have any?

 

Why get so offended by someone challenging an article?

 

[Liberty]

For one, I'm pretty sure Sanj was just kidding around by calling us "jackasses."  He had his grin there and I shot back with a wink so I think it was all in good fun.

 

 

Liberty,

 

His overall story is quite impressive. I don't see anyone doubting that. However, his investment returns are not (which is what the article is trying to convince us of). We're not "creating math" to show otherwise. That's certainly looks to be the cased on what we can tell. The story is trying to convince us that he's a great investor. We have no evidence to believe that he is. Do you have any?

 

Why get so offended by someone challenging an article?

 

Your assumptions are made up. You don't know his expenses and how much he added per year, and whether the article just cites peak earning figures (as these things tend to do -- journalists love to just use the biggest number they can find).

 

Fact is, someone who holds onto a 5m investment and turns it into 800m and someone who holds onto millions of Apple and MSFT  from IPO is a great investor, especially since he did it by doing technical research and identifying these companies when they were basically unknown microcaps. 99.999% of other investors couldn't have done this, as is proven by them not being able to hold on a double or a triple for more than a couple years.

[mjm]

member this guy. pretty impressive for janitor and gas attendant

 

https://www.boston.com/news/local-news/2015/02/12/after-life-of-frugality-vermont-janitor-bestows-6-million-to-local-hospital-library

 

see another remembers him and also the irs lady who bequeathed I believe $28M to a woman's college.  she tracked what well off people did on their returns.  could not find any thing on her.

[Guest]

For one, I'm pretty sure Sanj was just kidding around by calling us "jackasses."  He had his grin there and I shot back with a wink so I think it was all in good fun.

 

 

Liberty,

 

His overall story is quite impressive. I don't see anyone doubting that. However, his investment returns are not (which is what the article is trying to convince us of). We're not "creating math" to show otherwise. That's certainly looks to be the cased on what we can tell. The story is trying to convince us that he's a great investor. We have no evidence to believe that he is. Do you have any?

 

Why get so offended by someone challenging an article?

 

Your assumptions are made up. You don't know his expenses and how much he added per year, and whether the article just cites peak earning figures (as these things tend to do -- journalists love to just use the biggest number they can find).

 

Fact is, someone who holds onto a 5m investment and turns it into 800m and someone who holds onto millions of Apple and MSFT  from IPO is a great investor, especially since he did it by doing technical research and identifying these companies when they were basically unknown microcaps. 99.999% of other investors couldn't have done this, as is proven by them not being able to hold on a double or a triple for more than a couple years.

 

You're right I don't know his expenses or how much he added to it. I even said that. The assumption I made was that he didn't invest any of his $10 million a year (which he did according to the article). I'm assuming no new contributions so my calucation actually makes him look like a better investor than he probably was.

 

Apple and Micosoft were "microcaps" at their IPO?  ???

 

According to what I see, "Investors got their first taste of Microsoft back in March 1986 when the company, already a powerhouse in the tech world, raised $61 million in an IPO under the leadership of 30-year-old founder Bill Gates. IPO"

 

https://finance.yahoo.com/news/day-market-history-microsoft-ipo-145918947.html

 

$61 million in 1986 was hardly a microcap.

 

Or Apple:

 

https://www.cultofmac.com/457878/tiah-apple-goes-public/

 

 

But let's give him credit for his "microcap" investing skills. He has 3 home runs and still under performed the market. How is this good? It looks far more likely a case of luck vs skill. If anything the article shows that even if you're smart, most folks are still better off indexing.