Another Path to a Billion

I know the secret to becoming a billionaire investor.

It isn't to buy stocks at the bottom, though that helps. It isn't to avoid massive value traps, though avoiding losses is important. And it isn't buying the best companies available, though that, too, is an excellent strategy.

So what is the surest path to extraordinary wealth? Entrepreneurship.

Oh, to be an owner
Of the top 10 members of Forbes' latest list of the nation's 400 richest, four started firms that earned billions: Bill Gates' Microsoft is first, Warren Buffett's Berkshire Hathaway is second, and Larry Ellison's Oracle, third.

Four heirs to Sam Walton's Wal-Mart fortune come next, followed by New York Mayor Michael Bloomberg, founder of his namesake financial services company, and Charles and David Koch, who inherited their father's private oil refining business and transformed it into America's largest private company, Forbes reports.

And there are many more business owners among the remaining 390. Continental Resources (NYSE: CLR  ) founder Harold Hamm is 42nd with $7 billion. FedEx's (NYSE: FDX  ) Fred Smith ranks 227th with a $2 billion fortune. Leucadia National's (NYSE: LUK  ) Joseph Steinberg is 355th with $1.4 billion. And Qualcomm (Nasdaq: QCOM  ) founder Irwin Jacobs, worth $1.9 billion, ranks 246th.

Invest with owners
Feeling envious? I don't blame you. Wouldn't it be great if we were all billionaires, unencumbered by the need for money? Of course it would be. But that's not how the world works.

Still, I find it reassuring that, as rich as Gates is, the bulk of his wealth comes from staying invested in the company that brought him to the billionaires' ball. Why? Because anyone with a brokerage account could have enjoyed similar percentage gains.

In fact, many did. So great is the story of Microsoft's ability to generate wealth that it has a name -- the uprising of the so-called "Microsoft millionaires." At least hundreds of them must still exist. Think about it: A $1,000 investment in Mr. Softy at the dawn of 1990, four years after his debut on the Nasdaq, would be worth roughly $36,000 today.

Searching for the next Microsoft
That's why Motley Fool Hidden Gems co-advisors Seth Jayson and Bill Mann focus on the stocks of up-and-coming firms in which the managers own a stake. Some of the service's best-ever picks have featured meaningful insider ownership.

Consider American Oriental Bioengineering (NYSE: AOB  ) , a Chinese supplier of plant-based pharmaceuticals and other traditional medicines. Bill recommended the stock to subscribers in the March issue, and it's been a rare outperformer since.

Questions may linger about the Chinese miracle and the stocks behind them -- China Mobile (NYSE: CHL  ) and Baidu.com (Nasdaq: BIDU  ) , for example -- but most Sino shares should benefit from a government stimulus. If so, American Oriental's insiders will be among the first to profit. They still own more than 20% of the business.

So, don't envy the billionaire owners. Invest alongside them. They're the ones who really have the best chance to create the next Microsoft and make you millions in the process. Want help identifying promising prospects? Take a 30-day free trial to Hidden Gems. There's no obligation to subscribe.

This article was originally published Oct. 12, 2006. It has been updated.

Fool contributor Tim Beyers owned shares of Berkshire Hathaway and Oracle at the time of publication. Berkshire is recommendation of both the Stock Advisor and Inside Value services. Microsoft and Wal-Mart are active picks for Inside Value. FedEx is a Stock Advisor selection. American Oriental Bioengineering is a Hidden Gems pick. Baidu.com is a Rule Breakers recommendation. The Motley Fool owns shares of Berkshire and American Oriental Bioengineering. Its disclosure policy always takes ownership.


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