How This Legendary Entrepreneur Can Help You Find Great Stocks

The incredible rise and fall of Ford Motors in the early 1900s can teach investors how to find companies primed to dominate an industry.

Aug 17, 2014 at 10:51AM

The innovations of today may seem light years away from the inventions of the late 1800s and early 1900s, but the problems we're attempting to solve are no different.

Social networks and smartphones are changing the way we communicate in the same way Alexander Graham Bell did with the telephone. The first public health clinics were developed to slow the spread of TB and influenza in the same way we're researching cures to today's most deadly diseases. The list goes on. 

The greatest companies, whether today or 100 years ago, solve the biggest needs or desires of their time. As the story of Henry Ford can teach us, however, it's much more than that. These companies are driven by a mission that empowers employees and consumers; they bring something completely new to the table, and their business models are dynamic and adaptable.

Henry Ford Ford

Source: Ford.

On a mission
Railroads in the 1800s made travel across the United States possible, but daily transportation was still one of mainstream America's greatest problems. Though cars existed, they were expensive, unreliable, and complicated to fix.

Ford saw himself as a man of the people, and believed he could create not just a better car, but a durable and affordable vehicle for the modest American.

Keep in mind this was more than 100 years ago, so the same sentiment in 2014 might read more like, "I want to build a helicopter every American can afford." The idea was revolutionary. 

Great companies have a mission, and they stick to it because it's ingrained in their very core. Even when Ford's progress in developing this affordable automobile stalled, he rejected his investors' calls to build a luxury model he could sell to the wealthier classes.

Bringing something new to the table
Ford started with the Model A and created 18 more failures before launching the Model T. This would become one the best-selling cars in history, selling 16.5 million units in 19 years. 

Model T Ford

Source: Ford.

Ford revolutionized the car, and then vastly improved manufacturing and productivity by using assembly lines in which each employee was responsible for just one task.

There was, however, one big problem: Assembly line work was draining and employee turnover was high, thus increasing the cost of training new employees.

Ford solved the problem introducing the third of his revolutionary ideas, doubling employee pay to $5 a day. Adjusting for inflation, an assembly line worker's salary would have jumped from $15,000 a year to roughly $30,000. This decreased employee turnover, boosted morale, and improved sales by giving employees the opportunity to buy the cars they were building. 

Assembly Line Ford

Source: Ford.

Not every great company is first in its industry, but they always innovate and they're always the best. Ford saw what was available and made it better. He improved efficacy by adopting ideas from other industries and did what other companies wouldn't -- paying his workers twice the typical wage.

The last piece of the puzzle
Ford's innovation changed what Americans thought was possible, and they wanted more. The 1920s brought a booming economy and an increased consumer demand for all things new and exciting. 

Ford had the capability to create a more luxurious car, but the idea scraped against the grain of what Henry Ford stood for: an affordable car for the modest American. Ford had a mission, and he believed he had accomplished it with the Model T. 

Ford eventually released the car consumers were demanding, but as competitors swooped in, the company surrendered its strong hold on the industry. 

The last piece to the puzzle is whether a company's mission and platform are adaptable. Ford may have lost battle in the 1920s, but they didn't lose the war. Henry Ford's original mission of quality, durability, and affordability still remains today a big part of the "Ford tough" image and their success throughout history. 

As an investor that's what you should look for: A business that solves a big problem, has a clear mission you can stand behind, and has the potential to stand the test of time.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Dave Koppenheffer has no position in any stocks mentioned. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers