Mi nombre es Fernando Muñiz. Soy nuevo con las inversiones
bursátiles y llevo varios meses siguiendo a un experto americano.
Voy a empezar a comprar los productos que recomienda. Básicamente
son acciones y bonos de USA…
Por el momento les iré compartiendo información en ingles y si
alguien le interesa me contacte por favor para poder compartir
ideas y conocimientos para tomar las mejores decisiones de
El único beneficio que obtengo de compartir esta información
es simplemente reunirme con otras personas afines a estas ideas,
principios y estrategias de inversión. Gracias. Espero sus comentarios.
How to Create Your Own Legacy of Wealth
With a net worth of $44 billion, Warren Buffett is the
second-richest man in America and No. 3 on the
Forbes billionaires list.
Most people know Buffett as a great investor.
Why? Early in his investing career, he realized that there were
certain businesses that had strategic advantages—advantages that
allowed these businesses to continue to grow bigger every decade,
crushing their competition over time. He figured that if he could buy
those businesses when the price was right, the market would guarantee
him huge, long-term profits.
And that’s exactly what he did.
Buffett took the profits from his insurance company each year and
invested them in Legacy stocks.
Buffett is the ultimate buy-and-hold investor. He’s famous for his
purchase of Coca-Cola; perhaps you’ve heard the story.
Buffett bought 14 million shares of Coca-Cola in 1988 at an
average price per share of $41.08.
Let’s assume you bought 100 shares of Coca-Cola, too, but you
bought shares at $45 on December 19th, the highest closing price
How would you have done over the next five years?
At the end of 1993, your Coca-Cola shares would have been worth
$17,052. You would have realized a 278% gain over the first five years.
Those are great gains, but what would your investment in
Coca-Cola look like if we fast-forward to the end of 2011... 23
Your original investment in Coca-Cola of $4,500 would now be
worth $56,000. That’s a realized gain of 1,144%.
And that does not include the additional $15,000 you
would have collected in dividends over those 23 years!
Do you see the advantage when you think long term and just
leave a Legacy stock alone to let it grow?
By 1994, Berkshire Hathaway, Buffett’s company, had accumulated
200 million shares of Coca-Cola… a $750 million stake. From that
point, Buffett simply held his shares. But Coca-Cola pays a
dividend. Instead of taking dividends in cash every quarter, he
reinvested them to buy more shares of Coca-Cola.
How did it turn out? Well, in 1995, Buffett received $88
million in dividends from his investment in Coca-Cola. Fifteen
years of reinvesting later, Buffett now collects $375 million in
dividends each year. That’s more than four times what he received
Then, in his 2010 annual letter, Buffett told shareholders that
he expects to receive $750 million in dividends from his Coca-Cola
investment in 2020. Each year from that point, Berkshire Hathaway
will receive a dividend check from Coca-Cola that is more than it
paid for its entire investment in 1994.
If Buffett chooses, he could receive a check for $750 million
from Coca-Cola each year starting in 2020. That’s a 100% return on
his initial investment in one year. In 2021, he’d get another $750
million in dividends from Coca-Cola. Then another $750 million in
2022 and so on.
That’s the power of Legacy investing. Buffett gets it. It’s how
he has made shareholders in his company rich. The same $4,000
invested in Berkshire Hathaway in 1965 would be worth $19,477,375
at the end of 2011.
Remember, there was no trading involved in this example. With
Legacy investing, you invest money in a Legacy stock and then just
forget about it.
But here’s the real secret to accelerating your gains: You buy
more when the market takes a turn lower.
Most people are afraid to do this... but you shouldn’t be.
Stock markets always recover—often very quickly.
For example, some of you may remember that on Oct. 19, 1987,
the Dow Jones Industrial Average fell an incredible 22% in a
single day... the largest one-day percentage decline in history.
However, few remember that the Dow recovered and marched 15%
higher over the next four months.
We all remember the horrific attacks on the World Trade Center
on Sept. 11, 2001. The stock markets remained closed for more than
a week, as a result. When the New York Stock Exchange finally
opened for trading on September 17th, the market crashed 7% that day.
But again, it quickly recovered. The U.S. stock market was up
12% again just four short months later.
In the recent stock market meltdown of 2008-2009, the broad
markets reached their bottoms in March 2009. But just a year
later, the S&P 500, a basket of the largest U.S. stocks, was
And if you had the smarts and the courage to buy Legacy stocks
when everyone else was selling or too afraid to buy, your
“average” cost of those stocks would be much lower than everyone else.
Look at the difference in results between two investors.
One investor, John Legacy, buys Legacy stocks when everyone
else is too afraid to buy them. Another investor, Mary Fearful,
follows the herd and is too scared to invest money during a market crash.
John Legacy and Mary Fearful both buy shares of Coca-Cola at
the beginning of 2008 with their end-of-year employee bonuses.
Since each share costs $31.89, they both spend $3,189 to buy 100
In March 2009, John Legacy invests another $5,000 in Coca-Cola
when shares decline to $19.55 during the major stock market crash
of 2008-2009. Because he has the courage to buy at this point,
he’s able to buy another 255 shares of Coca-Cola.
Mary Fearful is too afraid to buy any more shares of Coca-Cola
during the crash. Instead, she doesn’t invest another $5,000 until
January 2010 as the market recovers and she feels it safe to
invest again. At that time, shares of Coca-Cola trade for $27.58,
so she is able to add only 181 shares to her existing position.
Now fast-forward to January 2013, and Coca-Cola shares trade
for $36.91 per share. Mary Fearful has a total of 281 shares of
Coca-Cola, for a total value of $10,371. But John Legacy has a
total of 355 shares, for a total value of $13,103.
Mary’s average cost for her two Coca-Cola share purchases is
$29.73. John’s average cost for his two Coca-Cola share purchases
is lower, at $25.72.
In a minute, we’ll show you exactly where you should put your
money to get started, and we’ll explain how to take advantage of
this strategy using our unique Accelerated Accumulation technique.
Once you’ve set it up, the whole thing should take less than
one hour per year to operate (and we’ll show you how to do this too).
But first, let’s review a few other important topics.
The Power of Compounding
The Legacy Portfolio is going to take advantage of the one
central investment strategy that’s mathematically certain to
produce a fortune over time. We’re talking about compounding...
We’ve seen compounding referred to as “the most powerful
force in the universe,” “the royal road to riches,” and “the
greatest mathematical discovery in human history.”
Albert Einstein called compounding the eighth wonder of the world.
Compounding is a simple investment strategy in which you
put your money in an investment that pays a return. At the end
of the year, you take your return and reinvest it with your
original stake. Your dividend, or interest, earns a return,
too, building a bigger dividend—or higher interest
payments—the next year.
A snowball is the best analogy for compounding. As you roll
the ball through the snow, the surface area gets bigger. The
more surface area on the snowball, the more snow it picks up.
The snowball gains mass slowly at first... but pretty soon,
it’s so large you can’t move it.
Compounding is slow and boring at first. But gradually, the
dividends grow, and your reinvestments increase. One day, you
wake up to find your account producing thousands of dollars
per year in dividends and your wealth a giant snowball.
Here’s a mind-blowing example from a study conducted by
Richard Russell of the Dow Theory Letters on the
power of compounding:
An 18-year-old girl puts $2,000 into an account each year
from the ages of 19-25, then stops contributing and lets it
compound at a rate of 10% until age 65. That means she has
contributed only $14,000 in total. But because of compounding,
by age 65, she’s almost a millionaire, with $944,641 in her account.
Now, let’s say this girl has a twin brother. He’s not as
disciplined and continues to blow his money on useless things.
Finally, at age 26, he realizes he needs to start saving, too.
He puts $2,000 per year into his account starting at age
26. He also lets his money compound at a rate of 10% until age
65. Except he contributes $2,000 every single year from ages
26-65. That means he’s contributed $80,000 in total... more
than five times what his sister has contributed.
By age 65, he’s almost a millionaire, too, with $973,074 in
Who’s the winner?
The sister contributed only $14,000 (2,000 per year over
seven years) and ended up with $944,641. That’s a net gain of
$930,641, or 66 times her original investment.
The brother contributed $80,000 ($2,000 per year over 40
years) and ended up with $973,074. That’s a net gain of
$893,704, or 11 times his original investment.
The sister was able to accomplish much better results with
much less money... all because she realized the power of
compounding money over long periods of time.
If you missed this, go back and read the example again
until you realize what happened.
Not only is compounding an incredible wealth builder, but
it’s also simple to do. First, you need an investment that
generates a return every year for many years in a row. Then,
you need time and perseverance to let the dividends grow.
Compounding doesn’t require vigilance, activity, or effort
to make it work. In fact, it works best when you forget about
it altogether. This is why compounding is by far the best
investment strategy for your children or grandchildren. They
have time to let the dividends accumulate, and they won’t
think about their accounts every day.
The Best-Performing Asset of All Time
So we know compounding works. Where’s the best place to compound
Jeremy Siegel is a professor of finance at the Wharton School of
the prestigious University of Pennsylvania. Siegel studied the returns
of different types of asset classes like stocks, bonds, Treasury
bills, and gold over a 200-year time frame.
The results were astonishing.
From 1802-2006, $1 invested in:
|•||Gold grew to $32.84|
|•||Treasury bills grew to $5,061|
|•||Bonds grew to $18,235|
|•||Stocks grew to $12.7 million.|
Stocks are a clear winner and the best-performing asset class of
But let’s be realistic. The average life expectancy of a U.S. male
is 83 years... and 200 years is a long time, much longer than any of
us have to live.
So how did stocks do over a shorter period of time?
Well, Siegel, in his book The Future for Investors,
studied the returns of 50 of the largest companies in existence in the
year 1950. Of these 50 companies, the ones with the highest returns by
the end of 2003 were Kraft Foods, R.J. Reynolds Tobacco, Exxon Mobil,
If you invested $1,000 in each of these companies in 1950,
reinvested your dividends, and didn’t touch them until 2003, you ended
up with a:
|• ||Balance of $2,042,605 in Kraft Foods|
|• ||Balance of $1,774,384 in R.J.
|• ||Balance of $1,263,065 in Exxon Mobil|
|• ||Balance of $1,211,456 in Coca-Cola.|
That means you turned a $4,000 investment into $6,291,510 by buying
four stocks and DOING NOTHING for 57 years.
Stocks are still a clear winner.
Now, if you invested the same $4,000 in a broad stock market index
fund, you still did very well. But you ended up with $1,118,936 at the
end of 2003.
Why did four single stocks outperform a broad stock market index
fund by more than five times?
Do you notice anything special about these four companies? None of
these stocks were in some fancy cutting-edge technology or biotech
industry. These companies focused on basic human desires and
necessities. Things like food, drinks, cigarettes, and fuel.
What can we learn from Siegel’s study of stocks? Enormous amounts
of wealth come from investing in stocks and leaving them alone for
long periods of time.
But more importantly... you can achieve even greater levels of
wealth by investing in Legacy-type companies. These are companies that
focus all of their energies into building powerful brands from simple,
boring, timeless products.
We’re going to show how to find Legacy companies. And one of the
four stocks mentioned above is in our Legacy Portfolio. But first...
Five Benefits of an Extended Time Frame
The time frame of a Legacy Portfolio is very long term. It is meant
to accumulate until you are well into your retirement. The idea is to
leave it alone until then. Some of you will never tap into it
personally. You may leave it as a legacy to others.
We recognize that some Palm Beach Letter readers will
want to cash in on it earlier than that. All well and good, but we
want you to understand the enormous advantages you get when you invest
with this kind of long-term perspective.
First and foremost is the power of compound interest. We discussed
this at length above. If you have ever looked at a compound interest
chart, you’ve noticed that the upward curve of wealth accumulation
begins slowly over the first 10 years and then increases rapidly after
that. By year 30, the numbers are really enticing. At 40 years, they
are simply unbelievable.
For investors with meager means, it will be in the millions. For
mid-level investors, it will be in the tens of millions. And for
affluent investors, it will be $100 million or more.
The second benefit of this long-term time frame is simplicity. You
won’t have to regularly monitor the markets or even worry which way
they are going. You can pretty much set up the Legacy Portfolio
strategy and leave it be.
The third benefit is peace of mind. With this sort of strategy, you
don’t need to worry about stock market fluctuations. Not even big ones
like we experienced in 2008 and 2009. (Buffett says that if they
closed the market for five years, he wouldn’t care.) In fact, you are
happy when the market—and even the stocks you are holding—declines.
That’s because you’ll be able to purchase more shares in these great
companies at cheaper prices.
This is the real secret to accelerating your gains... because it
lowers the “average” cost of your stock every time you buy at a lower
price and supercharges the effects of compounding.
The fourth benefit is that a Legacy Portfolio will prevent you from
paying unnecessary fees to money managers, brokers, and financial
planners. Over time, the fees siphoned away by these professionals
erode your wealth significantly.
Fifth, investing in stocks in a Legacy Portfolio will keep you from
being too conservative with your money. One of the greatest risks you
run is losing money to inflation in overly conservative investments
like cash, CDs, money market funds, and bonds. By investing in the
best companies in the world, you’ll grow your money at much higher
rates of return. Rates that beat the pants off inflation’s
Why Doesn't Everyone Invest the Legacy Way
By now, you’re thinking this sounds too simple. Or you’re
asking, “Can it really be this easy? If Legacy investing is so
great, why doesn’t every investor—professional or private—follow it?
There are three main reasons:
First, the Wall Street investment advisory complex—at least,
the way more than 95% of the professional community practices
it—is not geared toward long-term wealth.
Although most wouldn’t admit it, investment advisors (brokers
or financial gurus) have an entirely different objective—one that
runs contrary to the long-term acquisition of wealth.
That objective is yearly ROIs.
It is perhaps the greatest stupidity of the investing world,
but the investment industry enslaves nearly everyone to yearly
report cards. Investment bankers, brokers, financial planners, and
advisors all have their performances rated annually. Once per
year, the whole world gets to see how they did, compared with
This is just as true for the independent investment
Our performances are calculated, rated, and reported every year
by various industry “watchdogs.” These yearly report cards are
open to the public. And they get a lot of press. The advisories
with the best one-year track records enjoy big influxes of new customers.
The industry watchdogs report longer-term track records too,
but no one pays much attention to them. Consumers are hardwired to
focus on “who’s hot”—and that means who was hot last year.
This creates enormous pressure to produce short-term annual gains.
But the fact is that the bias toward short-term profits
is antithetical to long-term wealth building.
Second, people don’t practice Legacy investing because of Wall
Street’s powerful influences. Most people won’t believe they can
just buy a stock once and forget about it for 20, 30, or 40 years.
Wall Street has conditioned you to think that you need to do
more complicated things with your money. If everyone bought a
handful of stocks and tucked them away for 30 years, Wall Street
could not earn fees from you. It would go bankrupt.
As a result, Wall Street’s giant empire has spawned innovations
such as mutual funds, ETFs, 401(k)s, and the like. It’s designed
products like these to siphon fees from the everyday investor.
These fees significantly reduce the growth potential of your money
over time. And many times, Wall Street products hide the fees.
The Wall Street elite have spent billions of dollars in
advertising to train you to constantly move your money. Trading
from this stock to that one. Or rebalancing money from this
investment to that one. Or they convince you to leapfrog from one
great new discovery or technology breakthrough to the next.
Third—and perhaps the biggest problem of all—Legacy investing
requires extreme patience and discipline. Most Americans don’t
have them. You see, most people know about the power of
compounding. They even intend to take advantage of it. But each
time they start, something interrupts the process a few years later.
Society wires us for instant gratification. For example, we buy
a new car only to trade it in two years later for the latest
model. Or take housing: A typical couple will start out in an
apartment; a few years later, they’ll buy a three-bedroom house. A
few more years pass, and now they need an even bigger, better house.
What about your TV, your phone, your washer and dryer... or
your shoes and clothes? They’re never good enough.
This same psychology translates to our investing decisions.
Most Americans can’t resist the urge to tap into their savings or
liquidate their retirement plans for things they think they “need.”
Even if you’re disciplined enough to resist the urge to
constantly spend your money, Wall Street convinces you to move
your money from investment A to investment B.
Each time you do this, you stop the compounding process and
have to start from square one.
You need to understand these problems if you want to develop
Many investors don’t care about long-term wealth. They want to
start making good money now.
The truth is that you can’t get rich quickly in the stock
market unless you are both extremely foolish and also extremely
lucky. But what you can do, if you are smart, is
generate a reasonable amount of short-term income while
you are building up a retirement nest egg that will cover all of
your lifestyle expenses after you stop working.
Investors would be better off learning from Buffett’s secrets,
generating nearly guaranteed, long-term wealth.
When it comes to creating a legacy through investing, whom do
you want to trust and follow?
Is it someone like Warren Buffett, who has demonstrated that
Legacy investing works? Or would you prefer to stick with the
advice the mainstream media and Wall Street give you... advice
they’ve designed to keep you moving your money around and
interrupting the compounding process each time?
Legacy investing is the safest, highest-yielding investment
plan we know of. It’s based on a powerful—and proven—theory of
money management (used by some of the most successful investors in
How We Are Going to Help You Get Really Wealthy
As you may remember, we developed this portfolio because Mark
wanted to replicate the kind of long-term investing success that
Warren Buffett enjoys. Mark wanted us to assemble a portfolio of
10 stocks that he would buy and hold until he was ready to retire
or pass on to his heirs as part of their estate.
It’s not as easy as it may seem to create such a portfolio.
We have been working hard on this and have developed eight
criteria to find each Legacy stock for our portfolio:
It must be a continually growing business.
The first criterion is about safety. We will be selecting only
companies that have grown consistently over time.
This begs the question “How do you measure growth?” One way is to
track the growth in book value. Book value is the amount you’d get if
you shut the business down, sold the assets, and paid off any
Book value is good, but it’s not perfect. For one thing, it does
not count intangible values, such as the power of a worldwide brand.
You don’t need to be a financial analyst to understand the financial
value of having a brand such as McDonald’s, Apple, or Disney. Book
value also underestimates companies whose assets as a whole are
greater than the separate parts.
But when book value misses the mark in this way, we don’t mind,
since it does so by underestimating value. And that is something
that plays in our favor, since we’d rather be conservative than aggressive.
Even though book value is a good way to measure growth,
sometimes companies will be growing even though their book value
won’t show it.
2. It must be a cash-rich business.
The second thing we are looking for are companies that
regularly produce excess cash and have lots of cash on their
We like this criterion because Mark has been an entrepreneur
for 30-plus years and understands the value of cash. He’s taught
us that when a business faces a challenge, it helps to have good
management and good products and good customer relations, but
there is nothing better than having plenty of cash. Cash allows a
business to survive during tough times and to invest when the time
is right for investing.
In tracking cash, Wall Street analysts typically focus on
earnings per share or net income. But it’s too easy to fudge these
numbers to make a company look profitable when it’s really not.
That’s why we prefer to track the actual amount of cash a company
produces each year. Analysts measure this by a calculation called
“free cash flow.”
Free cash flow is the cash left over after a company pays all
of its normal bills and any other expenses to grow or expand the
business. It also adds back fictional expenses like depreciation
[Companies treat these fictional expenses like real
expenses on accounting statements. But in reality, no money
changes hands. In other words, free cash flow eliminates all of
the accounting gimmicks that companies use to hide their
financial blemishes. It’s the most accurate indication of the
actual cash a company produces.]
3. It must be a consistently profitable business.
Growth and cash flow are very important, but so are profits. In
selecting companies for the Legacy Portfolio, we will insist that
they have been producing profits—and relatively consistent
profits—over many years. To do that, we’ll examine the company’s
history of profit margins.
Profit margins are the percentage of profits a company makes.
If, for example, your business had revenues of $100,000 and a
profit of $30,000 last year, its profit margin would have been 30%
($30,000 divided by $100,000).
Profit margins tell you not just that the company was
profitable but to what degree. This is an important distinction in
calculating the financial stability of a business. For example,
let’s say you were looking at two companies.
Company A was growing at a rate of 10% per year and had a
consistent profit margin of 25%. Company B also grew 10% per year,
but its profits fluctuated wildly—from 2-50%. Which company would
you rather buy?
We’d rather buy the one with steady profit margins, because
steady profit margins are much more likely to continue.
When a company has a long history of consistent profit margins,
it usually means that its products are always in demand, its
business model is sound, and its management team is running the
company in a disciplined way.
Also, companies with consistent profit margins usually have
extra cash at the end of every year that can be reinvested to grow
the business, pay dividends to shareholders, or buy back its own shares.
4. It must be an industry dominator.
In the Legacy Portfolio, we want to own companies that are big
and powerful in absolute terms and that dominate their industries.
Usually, such companies have established and well-respected brands.
Dominant companies have big advantages. In terms of tangible
advantages, they usually have good cash flow, proven marketing
strategies, desirable products, sizable market share, and good
margins. In terms of intangible benefits, they have political
power, business connections, or healthy public relations. And most
importantly of all, they have powerful brands. Having a powerful
brand means having the trust of the marketplace.
When you have all of that working for you, it’s very hard to
fail. The only real question is, “How well will they succeed?”
That’s why we like these companies. Being adverse to risk, we
feel good about owning shares in companies that have nearly no
chances to fail.
It’s funny, but the financial community seldom concerns itself
with that question. You don’t hear pundits talking about whether
companies like Coca-Cola, Johnson & Johnson, or Nestle might
Instead, they talk about whether these companies met their
profit projections. Why? Because most financial pundits don’t care
about the long-term health of businesses. Rather, they focus on
the quarterly and annual performance of share prices.
The point we’re making here can’t be understated. The
bias toward short-term profits is antithetical to long-term
A company like Coca-Cola has been selling the same product
since 1886. It spent money inventing its core product more than
100 years ago. Today, it spends very little money on research and
development. It also has low manufacturing costs, since the
machinery required to make Coke rarely needs updating.
That allows Coca-Cola to invest its profits in building its
brand. It’s the reason why, in both the U.S. and the rest of the
world, Coca-Cola is the leader of the liquid-refreshment beverage
industry. As the world’s largest beverage company, 94% of the
global population recognizes its brand.
The Coca-Cola brand has a 26% market share in the U.S.
Worldwide, Coca-Cola is also No. 1 in the carbonated soft-drink
category, with a 53.1% market share. Coke, the beverage, is the
leading soda, with 18.3% of the entire liquid-refreshment beverage
industry. In other words, Coca-Cola is No. 1 in its business.
Do you really think that one poor quarter or year is going to
change Coca-Cola’s dominant brand status? Of course not.
Since your holding period for Legacy stocks is 30 years or
more, you don’t have to play and follow the Wall Street quarterly
expectations game. You can buy a Legacy stock that dominates its
industry and forget about it.
5. It should be a dividend-paying business.
To give the Legacy Portfolio an extra boost, we will be
favoring companies that have histories of paying shareholders
Financial history teaches us that companies that consistently
pay dividends to their shareholders, through good times and bad,
are healthy companies. And those that consistently raise their
dividends over long periods of time are the best.
Some of the companies we will be putting into our Legacy
Portfolio have increased their dividends for more than 40 years in
a row. Nothing shows greater commitment to shareholders than that.
The reason dividends are so important is because they
contribute to the long-term return on an investment. As time goes
on, those dividends become increasingly more important.
For example, Coca-Cola has increased its dividend 51 years
in a row. From 2003-2012, it has increased its dividend at a
compound average growth rate of almost 9%. It’s safe to say that
Coca-Cola will continue this streak because it has consistent
profit margins, and it generates billions of dollars in free cash
flow each year.
Let’s say you bought 100 shares of Coca-Cola in September
2013; you would have invested a total of $3,900. And then let’s
assume that Coke’s stock price does not move for 10 years.
If you reinvest your dividends and Coca-Cola continues to
increase its dividend by 9% per year, your balance would still
grow to $6,202. If Coca-Cola’s stock price stays flat for 20
years, your initial investment of $3,900 would still grow to
$17,971 by the end of the 20th year.
That’s the power of a Legacy company paying ever-increasing
dividends that you reinvest.
6. It must have an enduring, competitive advantage.
What is an enduring, competitive advantage? It’s something—a
unique technology, a patent or series of patents, a monopoly or a
powerful brand—that can hardly be eroded, even over a long period
Warren Buffett says that such companies have wide economic
moats. Their competitors cannot easily attack the dominance of
these businesses, just as medieval kings could protect themselves
from enemies by deep-water moats around their castles.
Walt Disney Co. is a great example of this. Disney is the
largest theme park operator in the world, one of the leading movie
studios globally, and the owner of several valuable media properties.
The simplest way to look at Disney is as a business that sells
stories to children and adults. The foremost way it does this is
through movies. Is there anyone reading this who hasn’t seen
Snow White or The Little Mermaid? Or are
there any parents whose kids haven’t seen Toy Story,
Finding Nemo, or Wall-E? Those are all
Disney films... and Disney owns the rights to all of these popular
classics that families around the world watch over and over again.
Disney’s theme parks use characters from these movies to
entertain and beguile adults and children. Disney’s movies act as
a breeding ground for characters and personalities that are
brought to life in its theme parks worldwide. It’s the perfect match.
These same movies also spawn TV series and programs that play
worldwide on the TV channels Disney owns.
Disney has created a trust and fanatical following for its
products that is near impossible for a competitor to replicate.
It would take a long time and billions of dollars for a
competitor to build a network of theme parks, collection of movie
characters, and loyal following.
Competitive advantages will be different for each Legacy
company. But each Legacy company will possess a unique advantage
that makes it very difficult, if not impossible, to compete with.
7. It must be resistant to recessions.
Many companies have business models that depend on a growing
economy. When the economy dips or slides into an all-out
recession, the sales of such companies drop, sometimes
dramatically. When revenues drop, profits are soon to follow. And
when profits drop, share prices do too.
Legacy businesses don’t vary that much because of differing
economic conditions. They sell products that are still in
demand... even during a recession. Products like soap, shampoo,
detergent, and food. That’s the special ability of Legacy
companies. They can endure through any economic environment, their
profits are much more stable, and they can still grow.
8. It must be a business that is well priced.
Legacy companies usually sell at a premium. And this is
particularly true when the market is bullish.
There is good reason for these premiums. Sophisticated
long-term investors know their worth. But sometimes—either because
of macroeconomic events (such as a recession), industry events
(such as a bubble bursting), or microeconomic events (such as
disappointing quarterly earnings)—their share prices drop below
their true values.
When this happens, we buy. Of all the advice we give you about
our Legacy Portfolio, nothing is more important than knowing when
to buy a Legacy stock.
The secret to making money with Legacy stocks is to buy them
when the prices are right and then hold onto them when prices dip.
This is—as I’ve explained before—not what we do with The
Palm Beach Letter’s Performance Portfolio. The reason is simple.
The Performance Portfolio is designed to beat the market on a
yearly basis. The Legacy Portfolio has a 10-40 year perspective.
We buy when prices are good and buy again the next time they get
good. Our goal is to accumulate as many shares as we possibly can
and let them compound into a fortune. That is how you get wealthy
That’s why, for each Legacy company we recommend, we’re going
to give you specific instructions on when you can buy it... and
when you can add to your position using our Accelerated
But we’re never going to sell a Legacy company just because it
becomes expensive. That’s because we don’t want to interrupt the
Instead, we’ll just continue to hold, collect our dividends,
and wait for it to come back into the buy range before putting any
new money into it.
The Legacy Portfolio has a different buying-and-selling
strategy than anything you’ve ever seen in any other newsletter.
In fact, it’s not really a buying-and-selling strategy at all.
It’s an accumulation strategy. You should think of your shares in
our Legacy stocks as currency or gold coins or poker chips. The
goal is to accumulate as many as you can. The more shares of our
Legacy stocks you accumulate, the richer you are.
It’s important that you understand that this is not a trading
service or even an investment service. Once you buy these stocks,
you should pledge to own them for the rest of your life.
And it’s only because our Legacy stocks are the strongest,
safest, most stable companies in the world that we can approach
wealth building this way.
Our Legacy Portfolio now consists of 10 blue-chip stocks.
But we don’t want to draw a line in the sand at 10. If we
uncover other Legacy candidates and they pass the test, we’ll add
them as bonus stocks to our Legacy Portfolio.
Legacy stocks are the greatest businesses on Earth. They keep
growing, in good times or bad. That’s what makes them legacies
that we want you to own forever. But even with the greatest
businesses on Earth, we have to make sure that we buy them the
right way and at the right time.