I'm certain that the better we know ourselves as investors, the more likely we are to succeed. And I figured that in order to know myself, it might be wise to know my dad a bit better.
So, I decided to interview my own old man, Richard E. Rubin. He's an extremely colorful character and has been investing his own money for the past 45 years. But after listening to him talk about stocks closely since I became a Fool, I've never been able to figure out his investment strategy. With this interview, I set out to find it in hopes of learning all I could. Surely, it would reveal something about my own investment style. Right?
Dan Rubin: Dad, as you know, I think your stock portfolio can fairly be called "The World's Dumbest Mutual Fund." (Richard laughs) It's as mystifying as Stonehenge. I've glimpsed it but can't imagine how it came to be. So I was hoping that by having a good old-fashioned father-son chat, I could learn something important about myself.
Richard Rubin: I'm not optimistic, but we'll see.
DR: OK. First of all, about how many stocks do you own?
RR: I would guess about 50.
DR: You don't know?
RR: How many fit on the brokerage statement?
DR: I don't know.
RR: Well, take that number and multiply it by five pages.
DR: And mutual funds?
RR: (Laughs loud, then) You name a fund family, and I own at least one from that family. I got Fidelity, Vanguard, American Century, T. Rowe Price -- you name it, I got it. And I got all kinds, too. Large cap, small cap, mid cap, foreign, technology.
DR: So you have about, what, 50 stocks and 50 mutual funds?
RR: At least.
DR: Is it possible that, when including the holdings in your funds, you own every single stock in the stock market?
RR: It's very possible.
DR: Why?
RR: I like to be diversified.
DR: Diworsified.
RR: Very funny.
DR: So, why not just buy a few index funds and make it simple?
RR: It wouldn't make it simple. At this point, it's too complicated. There's tax consequences and transaction costs and whatnot. I might add a couple of index funds...
DR: Add?! But you may already own everystock. Why add index funds?
RR: Maybe these guys who run the index fund will run it better. You know, it's not that easy to track all that (expletive).
DR: Dad, this is a family-friendly Website. OK. Let's dig deeper. Take Motley Fool readers into your mind while buying a stock. How does that magic happen?
RR: I read Barron's. I watch Bloomberg. I watch CNBC. I get a feel for the stock. And when the mood hits me, I buy the stock.
DR: A feel and a mood? Why not just hire a trained baboon to do back flips and get inspiration from the colors on his spinning bottom?
RR: I'm not a monkey guy. Look. If I like the logic of what I'm hearing from an analyst, I get a good feeling. For example, I saw a guy talking about cement companies selling cement to China. So I bought Cemex (NYSE:CX), and that worked out well.
DR: So there is some method to this madness?
RR: I like to buy lots of stocks from an industry that has been good to me with another stock pick. I once had a strategy in the 90s called, "If it rings, I'm buying it." I was big on phones.
DR: And how did that work out?
RR: I think that I'm doing well with that. It was good, then bad when cell phones came in. Now it's good again. AT&T (NYSE:T) is OK. Verizon (NYSE:VZ) is good. Cinncinati Bell is not so good. Quest is not so good. Nortel is not so good. JDS Uniphase (NASDAQ:JDSU) gave me a loss.
DR: Four losses, two wins. You're like Vince Lombardi. Let's talk about selling stocks. How do you decide when to sell a stock?
RR: I almost never do. (Laughs) I'm like Warren Buffett, but without the billions.
DR: Without the billions, he's an old man who eats hamburgers.
DR: Do you do any valuation work?
RR: None whatsoever. What am I, a numerologist? I prefer low PEs. But you can get hurt with the numbers stuff, too. I owned Valueclick (NASDAQ:VCLK). The stock was up for me. But it had a very high P/E of like 125. So I sold it. And after that, it tripled. A lot of good watching the numbers did for me.
DR: So you prefer to buy quality companies selling into emerging industries. And to determine the quality of a company, you trust your gut feelings?
RR: You want my strategy, Daniel? It's this: If, at the end of the year, after I pay my taxes, I have more money than I had at the beginning of the year, I'm happy.
DR: So, not counting your deposits, you have no idea how well your investments themselves have done?
RR: I know that in 45 years, they've gone up. Nicely.
DR: Forty-five years. That's ... Wow. Do you remember the first stock you bought?
RR: I do. It was Brooklyn Union Gas. The day after I bought it, they had an explosion. I almost died.
DR: In the explosion?!
RR: No. From losing money. It was horrible. I want to make a statement.
DR: Go for it.
RR: I'm like Polonius (the character from Hamlet) who said, "Neither a borrower nor a lender be." I buy cars with cash. I pay off my credit cards on time, always. But this strategy has cost me, too. Badly. 'Cause the best investment that I could have made was real estate. But I didn't want to borrow money to buy a house.
DR: So you play big defense? You play not so much to earn big returns, but to protect what you have, and avoid losses?
RR: That's true. Look what happened to you, with that piece of crap business you invested in? All that time you wasted. And all those idiotic tech stocks before the bubble burst. You're probably still not over all that.
DR: Not at all. I still feel that pain every month on my equity line of credit.
(I once lost over $50,000 investing in the world's worst mobile food franchise. To this day, I consider it the most important event of my career, and I'm currently developing a screenplay based on the comedic but awful experience.)
RR: Losses, any kind of losses, used to make me physically sick. They used to depress me very much. Now I'm better. I still hate them, but I don't get physically sick.
DR: Hey. Do you think I took that big risk on that business to show you that I'm not like you? That I could take losing money?
RR: Every son has to show his father that he's not like him.
DR: I'm not a big numbers guy, either. And I've been playing much better defense lately. I have a much better appreciation for your love of defense. I feel like I should say something corny, like about how it wouldn't be a bad thing to be like you.
RR: Please don't.
DR: Phew. All right. In wrapping this up, tell me this. What paternal wisdom do you wish to impart to me, and to all Fools, as we build our fortunes going forward?
RR: Make your own mistakes. You're great at that! Be your own person. (Reflecting pause) In order to invest it, you gotta make it. Live within your means. Max out all your savings and retirement plans. You should take advantage of everything that you're given -- IRAs, 401ks. If you have to spend money, spend it on what you love most. I love music. Opera. So I've spent a fortune on CDs and tickets to Lincoln Center. I have a gorgeous stereo system. And most of all, there's my girls. I love my granddaughters more than life itself. I spoil them every chance I get. That alone makes me a wealthy man.
For more offbeat interviews with Dan:
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Fool contributor Dan Rubin does not own shares in any of the companies mentioned in this article. The Fool has an ironclad disclosure policy.
