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 own firms that earned billions: Bill Gates' Microsoft (Nasdaq: MSFT ) is first, Warren Buffett's Berkshire Hathaway (NYSE: BRK-B ) is second, and Larry Ellison's Oracle (Nasdaq: ORCL ) is third.
Four heirs to Sam Walton's Wal-Mart (NYSE: WMT ) 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. News Corp. (NYSE: NWS ) founder Rupert Murdoch is 47th with $6.8 billion. Bradley Hughes is 78th with $4.5 billion in wealth stashed in Public Storage (NYSE: PSA ) .
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 $46,000 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 II-VI (Nasdaq: II-VI ) . Fool co-founder Tom Gardner recommended the stock to subscribers in the August 2006 issue and it's been one of the market's rare outperformers since. Yet Fools weren't the only ones to profit -- insiders still own more than 15% 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 on October 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 Motley Fool Stock Advisor and Inside Value services. Microsoft and Wal-Mart are active picks for Inside Value. II-VI is a Hidden Gems pick. The Motley Fool owns shares of Berkshire. Its disclosure policy always takes ownership.