Lessons on How to Build a Million Dollar Portfolio

Welcome to Episode #162 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

This week, she takes a look back at the investing life of one of the greatest investors of the 20th century: Anne Scheiber.
She began investing in 1944 with $5,000, inflation adjusted that’s $72,885, and when she died in 1995, her stock and bond portfolio was worth $22 million.

According to Money Magazine, which did a profile on her investing strategy in 1996, her return worked out to 22.1% a year, which out performed the father of value investing, Benjamin Graham, and came in just shy of beating Warren Buffett’s record of 22.7%.

How Did She Do It?

She apparently owned 100 stocks in the portfolio and almost never sold. She also bought well known brand name companies, especially in the drug, beverage, and entertainment industries. Why those industries? Because she knew something about them. Many of her stocks paid dividends, which she reinvested and bought more shares. The portfolio compounded over 51 years. She died at the age of 101.

Research, Research, Research

Anne Scheiber invested in the era before the Internet. It wasn’t easy to get information. Annual reports came in the mail. She apparently used to attend shareholder meetings in person. Today, we have a lot more information available at our finger tips. We can get financial information nearly immediately, see which insiders are buying shares within 48 hours of them doing so with a click on a mouse, and we can listen in, or watch on video, quarterly conference calls. It pays to know your companies inside and out.

5 Stocks to Consider for Your Short List

•    Anne liked drug stocks. One of her largest purchases, in the 1950s, was Schering Plough. It was acquired by Merck MRK in 2009. Merck is still paying a dividend, which is yielding 2.7%. Earnings are expected to be up 13% in 2019 and 9.1% in 2020.

•    Because Anne almost never sold, many of her stocks were bought out, often at a premium. One of those was Capital Cities broadcasting which was bought by Disney DIS. Since Sep 1, 2000, Disney shares are up 248% compared to the S&P 500’s return of 108%.

•    By the 1980s, Anne’s dividends were really adding up. When her portfolio was worth $10 million, she had yearly dividends of $480,000. It doesn’t hurt to get paid for your patience. Whitestone REIT WSR is paying a dividend currently yielding 8.15%. This owner of go-to-centers in major cities specializes in services and experiences.

•    There are other dividend paying stocks outside of REITs such as retail. The Gap GPS pays a dividend yielding 5.4%. It’s about to spin off Old Navy however. Shares are cheap with a forward P/E of 8.6.

•    Additionally, investors might want to keep an eye on the big banks. Wells Fargo WFC has one of the highest dividend yields at 4%.

However, it’s a Zacks Rank #5 (Strong Sell) because its earnings estimates have been cut. Will the new CEO be able to turn it around?
What other investing lessons can we learn from the remarkable investing talent of Anne Scheiber? Tune into this week’s podcast to find out.

 

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Wells Fargo & Company (WFC) : Free Stock Analysis Report
 
The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
The Gap, Inc. (GPS) : Free Stock Analysis Report
 
Whitestone REIT (WSR) : Free Stock Analysis Report
 
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