Last week, I started telling you how some insights led me to purchase three stocks that have done really well. Today, I tell you about another strategy I have.
Again, this is not advice. This is just me being transparent and showing you how my brain works. In a lot of ways, my belief system around investing has changed and this portfolio is a relic that points to past thinking. Most of these purchases were made years ago. The oldest, Google, I bought exactly 10 years ago today in its unusual IPO.
I’ll never be a CEO, CIO, VP, director or anything close to that. I’m glad, too. I have good friends who have ascended to those roles at their company and they bring home a hefty paycheck. However, nothing comes for free. A friend who was promoted to a director at a large retailer last year put in 80 hours a week for months on end. His two kids missed their father. I can’t live with the tradeoffs that I’d have to make to climb to a corporate leadership position.
There are lots of other things that I want to do with my life besides earn a paycheck. I’m thrilled that my ego doesn’t demand a position where I manage people or have a fancy title. I love programming. If I just wrote code for the rest of my working life, that would make me really happy.
Just because I won’t ever be a director or VP doesn’t mean that I don’t know a good leader when I see one. Today, I’ll tell you about some of the people in business who I admire most and what investments I’ve made as a result.
Surround yourself with the best people who will have you
You get to pick the people who surround you. Be wary of wasting time with bad people. They will drag you down with them. However, great people will take you places and make you a better person.
Similarly, putting your money behind great people can make you wealthy. Here are the investments I’ve purchased because of the company’s leadership:
- Apple (Steve Jobs): Jobs didn’t create, but redefined three product categories: music players (iPod), smart phones (iPhone) and tablet computers (iPad). Jobs was a visionary who stuck to his guns and didn’t care what others thought. He knew he was right and he usually was. I bought Apple stock when the iPhone was announced in January of 2007.
- Amazon (Jeff Bezos): Remember when Amazon just sold books? Now, it’s an open market for everything. Amazon also runs a pretty great cloud computing business for us programmers. Bezos’ mind is a decade into the future. Drone delivery? Amazon is one of the few companies in the world who could pull this off. And I think they will.
- Berkshire Hathaway (Warren Buffett/Charlie Munger): Buffett and Munger are the two most successful investors in history. So much has already been written about them, I can’t bring much new information to the table. However, I highly recommend you read Poor Charlie’s Almanack. It is out of this world.
- Chipotle (Steve Ells): Chipotle is the Apple of the restaurant business. They don’t have many products and grow slowly, instead choosing to focus on high quality and consistency. Chipotle is a 10 bagger for me and my 2nd best investment.
- Costco (Jim Sinegal [retired]): Sinegal always stated that the customer came first, then the employees and finally Wall Street. Right order I say! Focus on the company, not Wall Street.
- Facebook (Mark Zuckerberg): Facebook may very well be dead in 10 years or even 5, but I don’t think so. Like Bezos, Zuckerberg’s brain operates in the future. Oculus, a recent facebook purchase, will be a household name in 5 years and may surpass the business of facebook some day.
- Google (Larry Page, Sergey Brin): Remember when Google was just a search engine? Now, it has a world class email and maps service. Its phone operating system, Android, is by far the biggest in the world. However, I belive that the best is yet to come. Just look at the stuff they’re working on now; self-driving cars, microchipped contact lenses? Google is my best performing investment.
- Solar City and Tesla Motors (Elon Musk): The only thing more difficult than starting a car company is starting a rocket company. Elon Musk is currently doing both very successfully with Tesla* and SpaceX. Before that, he started PayPal. Musk is changing the world in very big ways.
*Accounting for stock splits.
**I should have 100 shares, but sold some a while ago. Big mistake.
Here are the qualities I think make a great leader:
- They don’t care about Wall Street: A good leader always puts the company and the product first. Make a great product and the money will follow. Once a leader starts talking about stuff like stock splits or buybacks, I know he or she is trying to appease Wall Street and I get nervous.
- They innovate: It’s not easy to keep a big, boring company going. It’s even more difficult when your business is changing constantly. Apple is the biggest company in the world and most of their profits come from a product that didn’t exist 8 years ago, the iPhone. I like to see leaders with big dreams who take big chances.
- They can pivot: Analysts said facebook was doomed and couldn’t make the move to mobile. Then, Zuckerberg proved them wrong and very successfully took the company to the small screen. A smart CEO isn’t afraid of making big changes when they see the wind starting to blow in a new direction.
- They are the founder: No one cares about your baby like you do. I’d rather have the founder running a business than a hired gun who can run the company into the ground and still reap $25,000,000 in severance.
- They are good people: Zuckerberg and Buffett have pledged to give their fortunes to charity. Both work to make the world a better place. I like leaders who I don’t have to worry about going to prison some day. This may not do much for the bottom line, but makes me feel better about supporting the company.
There are plenty of other great leaders. Alan Mulally (retired Ford CEO), Jack Dorsey (Twitter and Square) and Jack Welch (retired GE CEO) immediately come to mind. Henry Singleton of Teledyne was brilliant and one of the best ever. Who are your favorites? Let me know in the comments!
Thursday Rant: Me
I’m not done yet. You still don’t know what my biggest holding of all is. It’s not an index fund. I also have to tell you about my mistakes and why my portfolio is dangerous. Part 3 will take the form of a rant, with the crosshairs aimed directly at myself. Tune in next week on the 28th to hear the rest of the story.
*Plenty of people have stated that Tesla is highly overvalued for a car company. True, they are. However, Tesla’s real money making potential isn’t in cars, it’s producing batteries for other cars. Don’t ever bet against Elon Musk.
I’ve been so excited for the continuation of this series! Awesome getting a more in-depth glimpse of your portfolio!
I’m not just saying this just to say this, but I think we’re on a similar frequency in terms of how view potential investments. The only stock I actually own on your list is BRK, but every other one I’ve thought of and looked into at varies levels as potential future investments. All the qualities you talk about in these investments are the same ones that attract me to them as well.
However, outside of a very small number of individual stocks my wife and I both agree on, we are putting the bulk of our investments into ETFs, specifically VUN (which is the Canadian equivalent of VTI).
Steve recently posted…The Money Book Giveaway
We are even more alike than you think! Berkshire is the only company that I feel comfortable holding long term. Even when Buffett and Munger are long gone, I believe that the culture and safeguards are in place for continued success.
You may have already guessed that when I trade in my stocks, it will be mostly for Vanguard index ETFs as well. However, I’ll be a little adventurous and throw some money at more exotic ones like VGT (information technology).
I’m really enjoying the series 1500s. I feel the same way as you, about the trade-offs with the corporate ladder. I’m not doing 80 hour weeks…..it’s not worth it, and honestly my body can’t take it. I may be young, but apparently I’m delicate. Haha
Anyway, leadership is rare…….and different types of leaders accel in different corporate cultures. You throw Steve Job in General Electric or Warren Buffett in Bank of America, and I believe they would have been dramatically less productive. Their companies fit each of their management styles and it was the shareholders who benefited most!
-Bryan
Good point about managers fitting in. A place like GE needed someone more like Tim Cook than Steve Jobs. There are probably very few places Steve Jobs would have done well at actually. Apple fit him though.
Now, if he only would have sought traditional treatment then doctors first discovered that tumor…
Great article! The only individual shares I own are my own company’s share as part of my employee stock purchase plan. I have been investing in index funds. I want to grab some Berkshire’s this year though…
Savvy Financial Latina recently posted…Have You Checked Your Investment Fund Fees?
You are smart and this your strategy is where I’m heading. Tune in next week!
I hold 2 of those – I am a bit hog-tied by company savings plan. Anyway before I die I have on my bucket list to go to Berkshire Hathaway shareholders meeting. Weird bucket list item maybe but I think it would be cool.
May recently posted…Financially Savvy Saturdays Fifty-first edition
Mary, go to the shareholders meeting! We’ll be there again in May. It is great! Very inspirational. Buffett and Munger are getting no younger…
Loving this series and I really liked the thought process behind these purchases. As we’ve discussed at length, I plan to make significant purchases of Berkshire, but that’s about the only stock I feel comfortable owning.
So these 9 companies make up $479,000 of your $945,000 portfolio? And you said your biggest holding, which has to be at least $150,000 based on the chart, is not an index fund? So a minimum of $629k of your $945k is in non-index funds as of now?
Can’t wait to read more…
Brad @ RichmondSavers.com recently posted…NYC to Portugal to Thailand and Back for $120!
Biggest holding is 250K. Scary right? I am changing things up though. It is difficult due to taxes. I’ll get clobbered if I sell when I still have a job.
They are the founder. I think this is more of an added bonus than a must have, there are certainly great CEO’s out there that are not the founder, for example finding a bank with a founder is.
They are good people. This one wins a little more with me, I prefer someone who is a good person it says how they treat their employees and company.
If they are not the founder I would say proven success is important for a leader/CEO.
Even Steven recently posted…Starting an Ebay Business on a Credit Card
Thanks for look #2.
Wade recently posted…Fantasy football time
Hi Mr. 1500 ~
While hearing the logic behind your stock pics is really interesting (and for the record, if I were picking stock I’d pick your brain!), I’m most drawn to the comments about picking who you hang out with.
My mother always said family isn’t about blood, it’s about who you pick to be in your family. I’ve never forgotten that. Probably because we had an eclectic mix of people we counted in our “family.” Interesting characters ~ some blood relatives, some not ~ but all good people.
Choosing well who you align with is with is a skill worth honing for exactly the reasons you state. Thanks for reminder!
By the way, how are those Smarties coming?!?!?
Ree
Ree Klein recently posted…Dorco Razor Review: Razors That Can Help You Retire Early!
You remind me that I have to read “How to Win Friends and Influence People.”
Smarties will be a fall project. Must wrap up outside home improvement tasks first.
Hey Mr 1500,
Have you always followed these parameters since you started buying stocks? How have your rules evolved since you started buying?
Big Guy Money recently posted…YOLO – Live Your Best Life Today
The small rules have not changed, but the big ones have. I’m a big believer in the Vanguard index funds now. The problem is that many of these holdings are after tax, so it would be much better to wait until retired to (capital gains) to change things up. More next week…
I agree with you about Elon Musk – don’t bet against him – ever. He’s a visionary, which I think is slightly different than a leader, but still just as important – the leader is a bit more grounded. The visionary and leader have to decide where the company is going, and then let the management get them there. Without that visionary leadership, you don’t get Apple’s iPod or SpaceX or Tesla. Once those companies start to bow to the pressures of short-term market returns, they fail (see what’s starting with Apple after Steve Jobs died).
Mom @ Three is Plenty recently posted…Decisions, Decisions, Decisions
Yes, yes! YES!! Very good point. Very true of Jobs who was never an engineer or anything close to it. However, he knew what Apple needed to produce and did it. He wasn’t perfect, but his ideas have changed the world. For example:
Where would smart phones be without the iPhone? iPhone haters don’t seem to remember that Android wasn’t even touch based before the iPhone. The day the iPhone was announced, Eric Schmidt called a meeting and Android changed direction.
I also don’t want to ascend any higher in my company. Sure, the pay gets better, but the stress goes up, and you alienate your co-workers who have been your friends all along (going from colleague to boss just does that). Mix in the longer hours and time away from the family, and I just don’t think its worth it.
I love your portfolio! We own a lot of the same names, and its great to see that you are so focused on leadership.
Check out PRAA and PCLN if you are into leadership. Terrific leaders and they have been terrific stocks to hold for the long term.
Brian
Brian recently posted…Long Term Mindset Portfolio – Purchase 013 – NorthStar Realty Finance Corp.
I haven’t read Poor Charlie but I have read Snowball then the BRK annual letters and now I rereading Snowball and a theme that comes up often is betting on management. You are in some good company with your opinion!
Oh man, read the Almanack! You won’t regret it.