(1:00) - 50 Years of Buy and Hold Investing (5:30) - How Did Anne Scheiber Start Her Investing Journey? (13:05) - The Power Of Dividends and Compounding (17:30) - Creating a 22 Million Dollar Portfolio: What Was Anne Scheiber Buying? (27:45) - Can We Apply Anne Scheiber Investment Strategy To Our Portfolios? (46:00) - The Big Takeaway’s From 50 Years of Investing: MRK, PEP, MSFT, HON, PNC Podcast@Zacks.com
Welcome to Episode #326 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is going solo to talk about Anne Scheiber, one of the greatest mom and pop investors of all time.
Anne Scheiber: As Good as Ben Graham?
Scheiber was an auditor in the IRS before retiring at age 51. She then invested $5,000 in the stock market and over the next 50 years, grew it into $22 million.
Her portfolio was generating about $800,000 a year in dividends by the time she died at 101 years old in 1994.
She was a self-taught investor who attended annual meetings and read her broker’s analyst reports. She bought stocks in industries she knew and understood, including drug companies, beverages and entertainment.
In a Jan 1, 1996 article,
Money Magazine said her annualized return worked out to be 22.1% a year. That was better than Benjamin Graham’s return of 17.4%, and he’s considered to be one of the best investors of all time. How’d she do it?
Scheiber bought stocks in companies she knew and liked. She also bought and held, almost never selling, even during bear markets.
In the 1970s, her drug stocks were down 50% but she held on.
She reinvested the dividends but the taxes were high by the 1980s when she was making $40,000 a month in dividend payouts. As a result, her stock broker convinced her to shift some of the dividends into tax-exempt bonds and notes, with some paying 8% completely tax free.
When she died, her portfolio was 60% stocks, 30% bonds and 10% cash.
What Would Anne Have Bought? 1. Merck ( MRK Quick Quote MRK - Free Report)
In 1950, Scheiber bought 1,000 shares for $10,000 of big pharmaceutical company Schering-Plough. At the time of her death, that investment had grown into her largest in the portfolio and was worth $7.5 million.
Never heard of Schering-Plough? Merck bought it in 2009 for $41 billion.
Merck is a Zacks Rank #2 (Buy) stock. Shares of Merck are cheap, with a forward P/E of 12.5 and a PEG of 1.2.
It pays a dividend, which currently yields 3%.
Should long-term investors be considering Merck?
2. PepsiCo ( PEP Quick Quote PEP - Free Report)
Scheiber liked beverage companies and bought Coca-Cola. But when Pepsi was launched, Scheiber became a fan and bought that stock too.
PepsiCo became one of Scheiber’s top 6 holdings and was worth over $1 million upon her death.
PepsiCo is a Zacks Rank #2 (Buy) and pays a dividend yielding 2.6%.
But it’s not as cheap as Merck. PepsiCo shares are trading at 26.7x forward earnings.
Should famous beverage brands like PepsiCo still be a part of your portfolio?
3. Honeywell ( HON Quick Quote HON - Free Report)
Scheiber bought some aerospace companies including one called Allied Signal. It became a top 6 holding in her portfolio too.
After Scheiber’s death, Allied Signal was bought by Honeywell in 1999 for $15.1 billion.
Honeywell is a Zacks Rank #3 (Hold). It has a forward P/E of 23.2 and a PEG ratio of 2.4.
Honeywell also pays a dividend, currently yielding 2%.
Is Honeywell a long-term investor’s dream stock?
4. Microsoft ( MSFT Quick Quote MSFT - Free Report)
Scheiber’s stock broker said after her death that she didn’t like investing in technology because she didn’t understand it. While she did buy shares of Apple in 1985, there is no indication that she invested in Microsoft.
But Microsoft has become a favorite of long-term investors over the last decade, including Tracey who owns it in her own personal portfolio, thanks to its big free cash flow, growing earnings and its dividend.
Microsoft’s dividend is yielding just 0.9% now because shares have surged 300% over the last 5 years.
Microsoft is a Zacks Rank #3 (Hold).
Should technology stocks like Microsoft be included in a long-term portfolio?
5. PNC Financial ( PNC Quick Quote PNC - Free Report)
There were no banks among the top 6 stocks in Anne Scheiber’s portfolio, but she owned 100 stocks so it’s probable there was a bank or two among those stocks.
Before the financial crisis, banks were a part of many long-term investor portfolios for their steady earnings growth and reliable dividends. But investors have mostly abandoned the sector over the last 14 years.
PNC Financial is a large regional bank with a market cap of $71.6 billion. It has a forward P/E of just 12.1 and a PEG of 2.6.
PNC Financial pays a dividend, currently yielding 3.4%.
The banks have been out of favor the last 5 years. PNC Financial shares were up just 37.4% during that time compared to the S&P 500 which was up 77.2%.
Is it time to invest in the banks like PNC Financial again?
What Else Should You Know About Anne Scheiber’s Investing Strategy?
Tune into this week’s podcast to find out.