Today, I offer three key principles that have led to my greatest-ever investments.
I made my first investment more than 30 years ago, by a sheer stroke of luck. I was nine. My babysitter was walking me home from Rose Park in Washington, D.C., when I spotted and pounced on a stray wad of banknotes. They were curled up and pink, featuring what looked like portrait paintings.
My dad explained that I could keep them -- French francs worth $40! Once or twice, he tried to teach me how and why my first investment -- currencies -- would fluctuate. Bah, ha! It was over my head. But I was ecstatic. Forty free dollars shined alongside the $1 per hour I earned tediously weeding the brick sidewalk on our block. And so every morning, when The Washington Post arrived, I'd start with the Sports section, then flip to the stock pages, where I could watch my francs. They rose and fell by mere pennies each day.
One morning, five years later, my father sensed my dejection at the breakfast table. Actively tracked, my dismal francs had net lost value. Five years of losses (the word was pertes)! All the lessons on savings and investment had come undone. So he agreed to exchange the bills if I'd move my cash to a bank and buy my first stock ever.
The bad news continued.
Maybe I lacked imagination, but I felt loyal to my foreign brothers and sisters when I ordered up shares of Vie De France, a business trading on the New York Stock Exchange for $4 3/4. The company sold breads in a French tricolor box. I would buy their croissants at the Safeway, heat them in our toaster oven, smother them in melting butter, and devour them while I watched This Week in Baseball on TV. And from now on, I smiled to myself, I'd be making money at it!
Recently, my Dad shared how amused he was to hear me around the house shouting, "Vie, vie, vie! De France!" even as he watched the stock plummet. Together, laughingly, we sold those shares five years after buying them, for just $2 7/8.
So here was the net result. I'd been a saver when the great temptation was to spend that money. I'd tracked currency moves. I'd traded the banknotes in for stocks. I'd watched my stock day after day. And for what? Ten years in, the whole of it was worth about half the paper whorl I'd found on the sidewalk. I'd created and lived through my very own secular bear market.
But I'd learned a few things along the way. I'd learned about currencies. I'd learned a few French words. I'd learned about stock prices and their relationship to a business. I'd invested in something I loved. And though it all lost me money, these were my most important investments. They got me started, with a rooting interest. In fact, they pointed me toward my greatest investments ever.
Seven of my greatest investments ever
It has taken me 20 years of avid investing to find the three simple factors that have led to my greatest investment decisions. And one of those investments came to me five years ago, when I was invited by a college housemate, Jill Furman, to buy shares in a small, off-Broadway show that she was producing.
I went with her to see the core performers in their improv rap group, called Freestyle Love Supreme (which now has a pilot coming to Adult Swim on The Cartoon Network). The show was pure gold. The crowd roared throughout. I then went to see their new show, in its dress-rehearsal, rough-draft format at the 37 Arts Theater in New York.
The production was called In the Heights, created by Lin-Manuel Miranda.
What I saw was a remarkable, organically grown, and completely magical performance. And even though I knew at the time that theater investments were poorly paid, I invested for these three reasons:
- I loved what they were doing.
- The "employees" loved what they were doing.
- The "customers" loved what they were doing.
In my first investment, I had only considered the first factor -- my love for a warm croissant! But in the decades since, I've learned to listen to myself and to look very closely at how much delight is taken by all other partners of an organization (the employees, customers, and shareholders).
In the Heights brought together a cast and crew that would work together from start to finish. Its team of directors and producers demonstrated passion about every detail. And as the show gained exposure, 37 Arts and then the Richard Rodgers Theater on Broadway shook with standing ovations. In 2008, In The Heights won four Tony Awards, including "Best Musical."
As an investor, I enjoyed a fine return as the stock market collapsed. But what I learned dwarfed what I made in dollars.
I'd made the investment not on purely financial calculations. Not because of a stock chart. Not because of an industry rating. Not because of a detailed valuation spreadsheet.
I'd invested because I loved what they were doing enough to want to learn more. They loved what they were doing enough to stick with it from start to finish. And the world loved what they were doing enough to fill up theaters night after night for years.
You can find these three qualities hanging together at public companies, but it's actually rare. For example, most organizations aren't actually beloved by their employees. But all three factors are present in six of my greatest investments and recommendations:
- Whole Foods (Nasdaq: WFM )
- Costco (Nasdaq: COST )
- Netflix (Nasdaq: NFLX )
- Buffalo Wild Wings (Nasdaq: BWLD )
- Starbucks (Nasdaq: SBUX )
- Nike (NYSE: NKE )
View these organizations through the filters above, and you won't at all be surprised by how much value they've created for their stockholders. They have low employee turnover. They've shown steady and tremendous sales growth because of customer enthusiasm. And I wouldn't be surprised if you've gotten as much personal enjoyment out of them as I have.
My thinking about this was crystallized when, as a potential investor in In The Heights, I first watched Freestyle Love Supreme. It's why now, when I invest in companies beloved by their employees, customers, and shareholders, I call them my Freestyle Love Supreme investments.