The Janitor Who Left an $8 Million Estate

Alexander Green
by Alexander Green, Chief Investment Strategist, The Oxford Club
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You may have seen the news last month...

Ronald Read, a longtime resident of Brattleboro, Vermont, died last June at the age of 92. He lived modestly, as you might expect for a man who worked 25 years at a gas station and then 17 more as a janitor at a local J.C. Penny.

Yet his relatives were recently shocked to learn that he left an estate valued at almost $8 million.

His story puts the lie to the conventional wisdom that to get rich you have to be well connected, highly educated or an entrepreneur who starts his own business.

Read’s story is a revealing one. And - while I might argue that he made one serious mistake - virtually anyone could use his methods to build their own personal fortune.

Here’s why...

Read made his fortune in the stock market, where anyone with even a modest amount of capital can take an ownership stake in many of the world’s best businesses.

He had no great training in economics. But, as he proved with his own example, that’s not necessary for long-term investment success.

He owned at least 95 stocks, but was not a great stock picker. Some of his stocks - including Lehman Brothers - went to zero. The stocks he did own were mostly well-known conservative blue chips: American Express (NYSE: AXP), Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG), Raytheon (NYSE: RTN), General Electric (NYSE: GE), Dow Chemical (NYSE: DOW) and Wells Fargo (NYSE: WFC), to name just a few.

He was no visionary and avoided technology shares. Instead he favored - ho hum - railroads, utilities, healthcare, banks and consumer stocks.

He tended to buy companies he was familiar with, ones that paid large and growing dividends. Then he reinvested them. (My colleague Marc Lichtenfeld will attest to the success of this strategy.)

So how did this modest man with limited education, no business experience and far-below-average income amass a multimillion-dollar fortune?

Let me count the ways...

He was patient. He thought long term and wasn’t buffeted by daily news events or the regular caterwauls of market pundits. He didn’t mistime the market because he never tried to time it.

He diversified broadly. Some investment pros will tell you the key to making a fortune is a concentrated portfolio with a small number of names. The assumption, of course, is this small number will do exceptionally well. But what if it doesn’t? A smart investor spreads his risks widely not only to reduce risk but also to increase his chances of holding a big winner.

He kept his investment costs minimal. He didn’t use a full-service broker or other high-paid advisor. In fact, he used a discounter only to execute his trades. Then he took delivery of his certificates. And there were quite a few. When he died, he left behind a 5-inch-thick stack of them in a safe deposit box.

He never paid taxes on his gains. This is also how Warren Buffett became one of the world’s richest men, regularly claiming that his favorite holding period is “forever.” The advantage of this is you don’t pay any capital gains taxes. After all, the capital gains tax is not a tax on capital gains. It’s a tax on transactions.

He lived frugally. Although his stock portfolio hit the multimillion-dollar mark many years ago, he didn’t flaunt his wealth. He was generally recognized in the same flannel jacket and baseball cap. His most expensive possession was a 2007 Toyota Yaris valued at $5,000. He foraged for his own firewood and would often park several blocks away to avoid paying parking tolls.

So what did Read get wrong?

From an investment standpoint, almost nothing. But I’d question whether it was wise to never enjoy the fruits of his success while he was alive. I’m not saying he should have spent most of his money or even a significant part of it. But he might have treated himself (or someone he loved) to something special every once in a while.

Then again, that must not have been important to him. (And, after all, it was his money.) Clearly, he enjoyed living modestly, something beyond the imagination of many Americans today.

On the other hand, his local library and hospital in Brattleboro must be grateful.

Read bequeathed them more than three-quarters of his estate.

Good investing,

Alex

Have thoughts on this article? Leave a comment below.

P.S. Most people would be overjoyed to retire with seven figures in the bank (let alone $8 million!)... And yet, everyone acts like this is an unattainable goal. The truth is: there’s a simple and direct route to financial independence. And if you can commit just a few minutes a day, Alex can show you how to build a multimillion-dollar portfolio starting with zero. Interested? Click here for details.

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This Company Has an 85-Year History of Rewarding Shareholders

There is no singularly perfect way to build wealth. Some stocks you buy and hold for only a few months at a time (a concept that subscribers of Matthew Carr’s Emerging Trends Trader understand well).

Then there are some stocks you buy and hold for the long haul, like those Alex described in today’s featured article. Of course, you’ve likely heard of all those companies. So here’s one you may not be familiar with: Owens & Minor (NYSE: OMI).

A giant in the healthcare logistics industry, Owens & Minor has been part of Alex’s Oxford Trading Portfolio since 2009. OMI distributes medical and surgical supplies, as well as provides supply chain management services.

The company offers a line of medical and surgical supplies to healthcare providers under the MediChoice private label. And its supply chain management services include logistics, supplier management, analytics, inventory, outsourced resource management and consulting, and clinical supply management services to manufacturers of medical and surgical products.

For 85 years, Owens & Minor has paid a dividend to its shareholders. In Alex’s words: “When it comes to paying a dividend, OMI is about as reliable as a company can get... over the last five years, OMI has experienced an annual dividend growth rate of 14.2%. Currently, the company has a solid dividend yield of 3%.”

That’s way above its industry peers, which average around 2.42%.

“It’s not a nail-biting business,” Alex wrote in 2013. “But when it comes to U.S. healthcare suppliers, no other company does it better than Owens & Minor.”

- Alexander Moschina with Alexander Green

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