You've worked hard for your money. It's time to let your money start working hard for you. The two richest people in the world, Bill Gates and Warren Buffett, didn't get that way through inheritance or through their salaries. They got rich because they own large chunks of very successful companies. Granted, Warren and Bill largely founded those companies, but it's their ownership, not their direct labor, that gave them their fortunes.
The employees of any company work for the owners. If employees aren't making more money for the owners than it costs to keep them around, those employees won't find themselves employed for very long. The employees make a living, but the owners are the ones who get rich.
Hire Bill Gates and Warren Buffett
The beautiful thing about the American economy is that anyone can be an owner of a business. All it takes is some cash, a bit of patience, and an eye for finding opportunities. They say that the best revenge is living well, but let me tell you, they're wrong. The best revenge is knowing that the two richest people in the world work for you, and as they get richer, you get rewarded, too.
Bill Gates runs Microsoft
Best of all, you wouldn't have had to work for that money (beyond putting in the buy order). All it took was letting Bill and Warren do the heavy lifting.
Selling land in aisle three
For a more recent example, consider discount retailer Kmart. Price competition from Wal-Mart
Despite its other troubles, Kmart was an owner of a veritable gold mine: land. Kmart owned a significant amount of real estate, much of it in prime locations. That land allowed Eddie Lampert, the celebrated investor who steered Kmart out of bankruptcy, to embark on a strategy of selling well-located but underperforming stores. It was a brilliant move, and it helped the company streamline and receive huge sums of money to invest elsewhere.
The effect of striking gold
Lampert's strategy helped buoy Kmart's stock to the point that it was recently used as a currency to acquire Sears, another older retailer with significant real estate and shaky financials over the past few years. The combined company is known as Sears Holdings
Kmart's transformation took just about two years, in which time its shares skyrocketed from below $15 to about $140 a share. A lot of work by Lampert and his team went into making that happen. Investors who bought Kmart stock after it emerged from bankruptcy -- the people who decided to, in effect, hire Lampert -- merely sat back, watched the company's recovery unfold, and profited from the outcome.
Kmart's new owners succeeded after the firm emerged from bankruptcy because they owned land worth significantly more than its value on the company's books. Companies emerging from bankruptcy often have stronger financial positions than they had going in. Shedding overwhelming debt can't hurt. However, the stigma of their past tends to depress their stock's price.
My friend and colleague Philip Durell saw such an opportunity when he recommended long-distance giant MCI
Given its solid cash flows and a stock price beleaguered by the firm's past problems, MCI was an almost ideal value investment. I say almost because just after Philip selected MCI for Inside Value, the company got even better for its owners when MCI authorized a 40-cent quarterly dividend, a whopping 12% annual yield based on its price at the time.
Less than a year after Philip's recommendation, MCI agreed to be acquired by Verizon
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