The U.S. stock markets rank among the greatest creators of wealth that humankind has ever known.
That fact is why individuals such as Warren Buffett, Peter Lynch, and Philip Fisher, have built fortunes for themselves and for investors by being careful stock researchers and buyers of great companies.
They inspire hope that we can do the same.
Replicate their riches
But what separates Buffett, Lynch, and Fisher from most investors is their disciplined and decades-long commitment to learning. That's what made them masters. To build our own fortunes in the stock market, then, we must pursue learning about the past with as much zeal as we do predicting the future.
With that as introduction, I'd like to examine one key trait of the stock market's biggest long-term winners. These are stocks that, over the years, have increased hundreds of times in value.
And the key is simply this: An organization that was built to last 100 years or more.
A profit panacea
What does such an organization look like? The writings of Buffett, Lynch, and Fisher provide some hints:
- Management of unquestionable commitment and integrity.
- A long-term view toward value creation.
- Relentless focus on dominating and growing its economic niche.
While this short checklist is by no means exhaustive, it's worth assessing all of your holdings against it. Companies such as Overstock.com (NASDAQ:OSTK) and XM Satellite Radio (NASDAQ:XMSR), for example, are burning through cash and piling up obligations. They're likely not considering the consequences for the next decade, let alone the next century.
Contrast that with Sam Walton's Wal-Mart (NYSE:WMT) or David Packard's Hewlett-Packard (NYSE:HPQ). The former was a model for cost controls and customer loyalty. The latter made the "HP Way" the gold standard for any business that wanted to leverage its personnel into an enormous competitive advantage.
Why this? Why now?
This lesson is in my head because of a challenge issued seven years ago on our discussion boards by a Buffett critic. He wrote, "I invite any of you to compare the returns of CMGI (NASDAQ:CMGI) or Internet Capital Group (NASDAQ:ICGE) to the returns of Berkshire Hathaway (NYSE:BRK-A) over the next 20 to 50 years and see which does better."
We're just seven years out, but the "challenge" is long over. Since the date of that post, CMGI and Internet Capital Group are each down more than 98%. Berkshire has nearly doubled and remains, by my calculations, undervalued.
After all, with Warren Buffett at the helm, Berkshire has a model CEO. His judicious use of the company's cash hoard and refusal to split the stock despite widespread criticism are evidence of his long view. And the current marketing innovations by GEICO, as well as recent complementary acquisitions, indicate that this $160 billion organization isn't yet resting on its laurels.
Put theory into practice
At Motley Fool Stock Advisor, Fool co-founders David and Tom Gardner focus on finding precisely these types of organizations. Often, the recommendations look very different. The companies may be small or large, a video game maker or a reinsurer, dividend-paying or not. But what they share is the potential to achieve greatness over the next 100 years or more and to make a fortune in your portfolio along the way.
If those sound like the kinds of companies you'd like to learn more about, then click here to join Stock Advisor free for 30 days. Our picks are currently beating the market by nearly 40 percentage points on average, and there is no obligation to subscribe.
Tim Hanson owns shares of Berkshire Hathaway. Berkshire Hathaway and Wal-Mart are Inside Value picks. No Fool is too cool for disclosure.
