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This is the Value Investor Podcast with Tracy Reineck. All things value, all the time.
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Welcome back, Value Investors. So I've been thinking a lot about long term investing recently and I thought we would revisit some of the advice from Warren Buffett's lieutenant. He's the only remaining lieutenant now at Berkshire Hathaway to Ted Weschler. Remember, it was Ted and it was Todd and Todd has left. He's gone over to JP Morgan at the end of 2025. But Ted has remained and he is interesting actually. And we've covered what has happened with his Roth IRA in the past. I don't know if you have been listening since 2021 to the value Investor Podcast or the Market Edge, I'm not sure which one on. But for those of you who were listening in, you might remember that Ted has a multimillion dollar Roth ira. And this all came to the public's attention when a lot of tax returns were leaked to The Press in 2021. So Ted's was one of those with this Roth IRA that was leaked out there. So he decided to go to himself and discuss how he got $1 million Roth IRA and basically give us all some advice. So I thought we would revisit how he got his, what we can do to get ours, and how it all kind of plays out for those of us who aren't outstanding stock investors like Ted is. So his story began in 1984. Yes, over 40 years now when he started his first job as a 22 year old. He was earning a $22,000 a year salary then and decided to put some money into the company's 401k. He did get a match for that. And it's never said in any articles how much he was putting in, but it sounds like quite a bit. So maybe he was living like at home or back then he had maybe an apartment with cheap rent, something like that, which allowed him to just kind of sock it away, you know, maxing out Perhaps even his 401k back in the day. But we also did have a booming stock market in the 1980s outside of the crash of 87, but it recovered quickly in the, in that crash. So we did have a bull market during these years. He was putting into his 401k. So he left that job in 1989. So he was there for five years and he managed to save $70,000, which was a lot of money in the 1980s. Just for some perspective, you definitely could have bought kind of like a middle class house for $70,000 in the 1980s. So he was definitely stocking it away probably in equity funds that were in the 401k. And he really benefited from that bull market in stocks. So when he left the job and had the 70,000, he rolled it over into his own IRA because he went on to open up his own hedge fund business and investment management firm. So he didn't go to another employer and start up another 401k. So he just rolled it over. But as you know, when you have an ira, you can put it into individual stocks at that point. So he was able to do whatever he wanted with that 70,000. You know, for the most part, he did say that he has took concentrated positions in undervalued stocks during that time period. And if you'll recall, from 1990 through 2000, it was also a bull market and stocks were up big in that period and it included the dot com boom and bubble at the end of that decade. But he wasn't without his losses in this account. He said he made some bad Investments in 1990 when he first rolled it over, and he had a 52% loss in 1990 that he had overcome. But clearly he did, so that account kept going. He. I don't think he's ever said if he put more money into it, if he was putting in an IRA contribution into it, but either way, that would have been very small amounts as this account kept growing in the bull market. And by the year 2012, that account. Okay, get ready now. That account was worth $131 million. So that is 22 years after he rolled it over. So 70,000 to 131 million. He has didn't put it into private equity or, you know, pre IPO or anything that he bought stocks that, you know, anyone could have bought. But obviously some were maybe a little riskier than others during that period. And in 2012, he decided to convert that IRA over into a Roth. I remember, I remember him saying that there was some kind of amnesty or something, something that the government was offering in 2012 that he thought it was a good time even though he had to pay taxes on it when you convert over. But he thought it was more attractive to do at that time to convert it over. So he did end up paying $28 million in taxes to convert this account into the Roth IRA. And then by the time all of this came out to the public in 2021, it was worth 269 million. But I want to say that figure wasn't the 2021 figure but really 2018, as that was the year that the tax return was leaked like that, not the year, but the year of that. That was the year that they leaked the information. So he kept that number and he was talking about that number. But either way, even if it was 2018 or 2021, no, I'm pretty sure it was 2018 because I'm looking at some other data I wrote down here. So from 1989 to 2018, that was about a 300,000% gain in his account. Now, you know why Warren Buffett hired him. And it was about, I've seen about 31% annualized during that period. Now, most of us are not going to be able to do this, right? This is why he is Warren Buffett's lieutenant. But he also talked about how if he had only just taken that 70,000 and put it into the S&P 500, like the ETF, the V O O or the Spy or whatever other S&P 500 ETF you like, it would have been 1.6 million by 2021, when he was giving all these interviews. So that's still very impressive. It's 23 times the gain would have been during that period. And that is more realistic for what many of us hope to achieve. Right? That's why we're always being told, own the index. That's why Warren Buffett himself has said, own the index. And after he passes on, he wants his wife's money to be invested in the S&P 500 index. So that is still very impressive. And I actually figured out the amount going forward because The S&P 500 has had a nice little run since 2021. Yes, we had some difficulties in 2022, but it's still managed to hit new highs later on and has continued to hit new highs. And we're only a couple percentage away from another new high here in April 2026, even with the war in the Middle east going on. So it would have been another nice chunk if he had kept it in the S&P 500, and he would have about 2.4 million in there right now. But that also tells you the power of compounding and what can happen when you get these bigger numbers like a million dollars and you have time on your side. So he also has given out a lot of, you know, key lessons, let's just say, about how he did it and what he would tell the average person to do. So lesson number one was start early. He was 22 years old when he started putting into the 401k. He's not saying you have to start when you're 15 or anything. So it is realistic. If you go to college and you get out and you get your first job, it is realistic to start with. You know, you might not be maxing it out, but you don't need to because time is on your side. But putting something in to an IRA or a Roth IRA or a 401k in your first jobs in your 20s. So start early. Number two, he said, was maximize the match. If you are lucky enough to get a match with your employer, don't leave that money on the table. It's sitting right there. So get that max. And you know that'll help you to save even more money, obviously. And then number three is interesting and I'm not surprised he's again the lieutenant of Warren Buffett, because this is Buffett's own thinking as well. Invest 100% in equities. If you're younger, you can totally do this. You know, there's many personal finance gurus out there who will talk about what kind of mix your portfolio should be in as you get older and as you're heading towards retirement. But for the stock managers, like a Buffett, Buffett is also always believed in being 100% in equities, a little bit in Treasuries and cash as well, which he now has Berkshire Hathaway in, but he hasn't bought bonds. And so if you want to maximize your gains, they believe that equities is the place to be. It has the best performance over the last 80 years. So if you have a lot of time and time is on your side, then invest 100% in equities. And then number four should be easy to do, but is among the hardest of these lessons. Ignore all other noise. This is very difficult even right now while the war in the Middle east is going on. While we had the pandemic six years ago, while we've had, you know, bank crises, while we have right now maybe private equity shenanigans going on, it's very difficult to ignore all of the things that we see in the news and now on social media and the stock market's reacting and it will have sell offs. And so only the best investors can really ignore all other noise. But we will try, right? I also think it's not that easy if you're a long term investor and you want to be in the individual stocks to do what Ted has done. That's why he recommends the indexes. But many of us want to do the individual stocks, because we are still looking for that lottery stock. Or some way we can get maybe not 269 million like he was able to get in his, but maybe we're able to get, you know, 2 or 3 million in it by guessing correctly on some of these stocks, like by buying Nvidia 20 years ago or any of the Mag Sevens for that matter, you know, 10 or 15 years ago. But how do you keep that doing it? So I searched through my notes and I have been keeping lists of the top 30 stocks in the S&P 500 from Charlie Bilalo. He is on social media. You can find him on Twitter or X now. And he gives out these charts every once in a while of the top 30 stocks in the S&P 500 over the past number of years. Sometimes he'll do 10. I've seen him do 10, 20, and 30. He might have also done five. But he was also putting out 30 years during the pandemic. And I wrote one down because I did find it to be very interesting. During the pandemic, this was the 30 years from 1990 to 2020. And so that was six years ago now. And a lot has probably changed just in that amount of time. So I'm gonna. I'm gonna read through the top 10 just to give you an idea of what were the top 30 stocks in the S P 500 over the past 30 years at the start of the pandemic. I don't have an actual date on this, but it's definitely was in 2020. Maybe he did it in 2021 through 2020. So number one was Monster Beverage, and it was annualized at 37%. So a $10,000 investment back in 2020 in Monster Beverage, if you had owned it for 30 years, but it only went IPO in 95, so it was really only 25 years, would have been worth 29. $10,000 would have been worth 29.6, 29.6 million. This is what we are hoping for right when we're looking around for stocks. Amazon was number two. It was annualized 38.4%. It went public in 97, May 15, 1997. The 10,000 would have been 21.7 million. Then we had Jack Henry and Associates. This is the odd one out. I always felt on this list, the ticker for that one is JKHY, and that is annualized 28.7%. They went public in 1985, and that $10,000 would have been 19.4 million. Then we Start to drop down quite a bit. So there really were only at that time three mega lottery stocks. But then we had Cerner. That's a health care stock. C E R N. Not sure if they're still around. Let's look. C RN No. So I think they got bought out by someone, if I remember right. But I think they were health insurance. They probably got bought out. So 27.4% annualized, $10,000 was 14.1. Then we had Best Buy. That's number five Best Buy. They went public in 87. 26.1% annualized. 10,000 invested was 10.5 million. Kansas City Southern, the railroad comes after that. They went public in 1962, 25.2%. This is why Buffett likes the railroads, right? Great, great annualized return over 30 years. 8.4 million. If you'd put 10,000 in Ross stores. ROST is that ticker. 1985 IPO, 25.1% annualized, 8.3 million. Altria, the tobacco company, they went public in 85. 23.6% and you would have had 5.7 million. UnitedHealth, again, another health care. They went public in 91. 24.3% and you would have had five point seven million. IDEX Labs is number 10, 23.8 million. That ticker is IDXX. 5.5 million. It would have been worth your $10,000. Now just looking as we continue on, because this is like the top 30 stocks. Where are some of our other fun names, right? Some of the other mag sevens not seeing, you know, this is the 30 year and some mag sevens like Meta only went public, you know, not even a decade before. So they just didn't have a long enough time period to make this list. But also on the list, Apple was number 14 and it would have. Your 10,000 would have been 4.2 million. Oracle number 17. Your 10,000 would have Been 3.8 million. Interestingly, Cisco, which everybody kind of goes me about, annualized 21.9% and your 10,000 also would have been 3.8 million. They went public in 1990 if you recall, but they were the best performing stock of that decade, up 10,000% in that decade alone. So if you weren't in it, if you weren't in Cisco for that first decade, probably you aren't getting the 21.9% over that period. That's always another thing I wanted to talk about about these long term numbers. When you're looking out over the 30 years, it does become a question of who can Avoid the noise. Who can stick it out when things get pretty grim for possibly even a decade? Who can, I don't know like so much when you're talking about this length of time. And who's going to get it right on the lottery stocks for decades? Most companies aren't going to keep their edge for that long. So that's when it becomes very difficult to own these individual holdings for most of us who are laymen. Right. When we're not Ted or Warren Buffett. So just looking at Cisco for the last 20 years, because this is a 30 years and this was from 20 through 2020, but current 20 years back. So to 2006, 2006 it's up. Wait, I did it to 2005. I don't want 2005. 2006. Let me get it right here. Okay, so through 2006 to 2026 it is up for. No, the S&P 500 is up four hundred and eleven percent and Cisco is up two hundred and fifty eight percent during that time period. So we're not getting the 21%. And a lot of Cisco's gains over this 30 year period was front loaded. Also Starbucks is number 20,000 invested. In 1992 when it went public it was annualized 23% but that would have been 3.6 million. But Starbucks has been lagging as a Starbucks shareholder and I've talked about this on prior podcasts, it hasn't been a good 10 years easily and certainly hasn't been in the last even five, five years. The stock is actually in the negative. So Starbucks is somewhat similar. Actually I'm looking at it now to Cisco over the 20 year time period and it's about the same. Oh no, it's about the same as the S&P 500. Sorry. So up 406%. So that's interesting. But you can see if you're looking at the chart like how little it has done over the last five years for Starbucks and just looking at it over the five years, it's down 12% during that period. The S&P 500 now is up. The VO is what I use. It's up 62% in that period. So a lot of stocks that make these lists of the 30 year best performers are some, but not all are because something good happened quite a while ago and if you were in it then you are still benefiting. But a lot can't hold on to this kind of performance over the longer period. Even the mag sevens. So taking a look at the mag sevens over the last five years, the best performer is Nvidia. Not surprising because of the AI revolution and it's up 875%. So they made it seem easy to want to hold Nvidia over the long haul because it is one of the better performers. I haven't seen the list recently to where Nvidia shows up. Let me see if they're even on this one from 2020. They are. They're number 21 on this list from 2020. And they were annualized at 30.7% back then. 10,000 invested was 3.5 million. But we now know this, that's much, much higher. Now Microsoft is also on this list, 21.4% annualized and the 10,000 was 3.3 million. But then they went public in 86. But we also know that from 2000 to 2013 that was like a dead stock. As then it had a bigger rally. But over the last five years, and including 2026, where it's down big in 2026, Microsoft's only up 44% over the last five years. So that's about 9%. But for people expecting 20% annualized or more and have been getting something similar to that, it's a little shocking to have it kind of revert back to the mean. Especially if you're trying to build a $1 million Roth IRA. Right. Amazon has been an even worse story. I own both Microsoft and Amazon in my own portfolios. Just to disclose. I know many of you do too. I also own Starbucks, but I have been lightening my position there. Amazon up just 27.3% now over the five years. So that's really underperforming now. McDonald's up 33% over that time period. Just looking at some of these other, other stocks. Okay, I'm like clicking on it and it's changed a little bit. Amazon up 31%. So I guess that is 8% return annualized over the last five years. But McDonald's up 32. But these are without any kind of dividend. Amazon doesn't pay one, but McDonald's does. That's why the dividend can be important in long term investing. Adds on a percent or 2% and that makes all the difference when you're compounding over long periods of time. Some of the other big winners from prior decades that I thought were interesting is Home Depot. They are down, down on the year for Home Depot. Let me see here. It's, it's hiding, it's hiding on my chart because I had too many stocks on there. Okay, Home Depot. No, Home Depot is up on the five year, but only 22.9%. Starbucks is the only one that I looked at that is actually down over that five year period. But another stock that would be down that appears on this list from 2020 is Pool Corp. I've talked about them, they were number 11, 28.3% annualized. They went IPO in 95. 10,000 invested was 5.4 million in the start of the pandemic. The stock soared further during the pandemic because we were all putting pools in but it's really retraced back down now and it's been one. It's definitely at five year lows and has been one of the real underperformers that I follow but looking, looking for some value in there. So over the five years it's down 38.7%. I'm keeping these on my watch list because when you see a big retracement like this with companies that are very well run with a product that's not really going anywhere, it's not like a pool can be AI'd anytime soon, then you know, maybe we will get a buying opportunity. But shares are still pretty pricey here and believe it or not, I'm waiting for them to break down further before I really see the value there. So remember, Ted looks for concentrated positions in undervalued stocks. So he's not as interested in some of these much more expensive big name stocks like a Walmart. Over the last five years Walmart is up 182%. Costco up 209%. During that period, Walmart has continued to make new highs. Costco has kind of been just treading water. It got very expensive, 50 times forward earnings. And then over the last year, year and a half, it's just been in a narrow trading range. It's had a couple little sell offs, buying opportunities, but the stock is still extremely expensive. And as value investor I just can't go there on something like a Costco or a Walmart. Walmart's even more expensive. Walmart trading at a higher valuation than Nvidia right now. So that becomes the question on some of these stocks. As you know, Ted might have been buying it as, you know, extreme undervalued. And that's where you're going to get the big gains ultimately. But what happens if you've owned it all of those years and now it's not quite so undervalued? And a good example of that is Apple in the Berkshire Hathaway portfolio. He bought it at about 9 to 10 times forward earnings and he's been selling it around 30 times forward earnings. He has said they still have a big position in it and I think he said he regrets a little bit selling it when he did. But those valuations are just really stretched. So as a value investor that means the upside is a bit more limited there. It's just going to be. You'll get momentum trade and you'll get the stock turning into a gross stock. But we want moment. Well, we want momentum but we want the value to still be there or to still have those earnings growing so much that it's not extreme valuations like 50 times. Microsoft is an interesting play. Again, I own this in my own personal portfolio but remember the forward PE was as high as 34 times and I haven't looked at it since. It's pulled back, you know, over 30% here in 2026. It is at 2025. Liberation Day lows. It looks like it's bouncing off of that a bit. Earnings grew 15.6% last year, expected to grow 25% this year with 9.6% in 2027. So is this a deal? Is Microsoft a deal on the sell off? Price to sales has come down. It was over 10 the last time I talk it and now it's at 9. That's still pricey but 10 was the level in 2000 where it really got hammered A lot of those tech stocks that was just too expensive for the market at that point when the bust happened. So we are starting to see it be more attractive here. Price to book is at 7 again. P is at 21.8. Peg ratio 1.2 for that's, that's pretty low. It's not quite at classic value which is one or under. It is a Zach's number two rank right now. So this next earnings report will be interesting to see if we get some more value people starting to pile in on a Microsoft here. So not, not too, not too shabby. Ms. FT is the ticker case. You wanted to know another stock that's one of the best performing stocks. That's one of lottery type stocks and I heard a hedge fund manager talking about it and about how he loaded up in this company in you know the right after the dot com bust in like 2004, 2005. And it's intuitive surgical. They make the da Vinci surgical system that the surgeons all use at the hospitals around the world. And this has been one of the big winner stocks as well. Over the last 20 years it's up 3110%. The S&P is up 402% or 5% depending on when you click it during that same time period. So, well, outperforming, but not as great over the last five years, but still outperforming the S P over the last five years as well. But you are going to pay the price to get these shares unless you can get it on one of the big pullbacks which it has had. But right now it's trading at 45 times. So these are the types of stocks that have turned out to be lottery stocks, but not so much for value investors. Unless you got this one in 2022 on the big sell off. But even then it was still expensive on a PE basis. Earnings expected to be up 12.5 this year, 13.3 for next year. Is that enough to pay 45 times for these earnings? Shares are off the highs and they have been trending lower here in 2026. So maybe this is a similar situation to Microsoft where the street was just like, you know, we've been paying up for these earnings all these years, but we were paying up for 20% and higher earnings. And now we're not willing to pay 55 times for for 12% earnings, but maybe we'll pay 35 times. So we'll see. I would still be on the sidelines for something like intuitive. Price to sales is still 15, almost 16 times. Peg is at 2.9. So these are all pretty stretched. This is still a growth stock, but not on value and certainly not undervalued here. But that's another one that I've seen on many of the lists and people talking about. So that ticker isrg again for intuitive. So it's hard to find individual stocks. The old winners might not be the winners going forward. Like a Home Depot that has really kind of come down off of its big win that you could own Home Depot for another, you know, for several decades and do outperform by these big numbers. Also to get a 20% annualized winner like a Berkshire Hathaway is pretty rare. Even looking at this list going down all the way to number 30 on this list that is right above the 20% marks. So that they did annualize 20.8% this company and it's Lowe's, the home retailer low is that ticker when IPO in 79, 10,000 invested over 30 years would be 2.9 million. And that's what happens when you get 20% annualized the power of compounding really starts to pick up over all those years. But finding one of these stocks, getting in and managing to hold on when you get sell offs like Microsoft right now down 31% or even bigger when Ted got had a loss of 52% in 1990, he stayed in there and continued to invest. Sometimes you have to sell some loose users to get the big winners and then you have to know when to cash in on your profits as well. That's why again, it might just be better to add in the s and P500. You'll still be a millionaire over these long time periods and even more so if you are still adding to that portfolio at the same time. Now remember, this all began with $70,000 in 1989. That's how Ted ended up with 2.4 million by 2026 in the S&P 500 without adding anything more during that time period. But that's a long haul. A lot has happened in that period. So you really have to believe his number four lesson. Ignore all other noise. But it shows it can be done. And not all of us are going to be the stock picking genius that he is. That's why we own Berkshire Hathaway, right? That's why we're buying that. We're buying Warren Buffett and Ted, who's, who's still there to pick these big winner stocks over the long haul so we don't have to. Berkshire Hathaway Ticker BRK B that has pulled back off its recent highs. I'm probably going to do a full episode on it because I am kind of been watching it closely, looking for some kind of entry point because it's still expensive to me. It's still trading at 23 times forward earnings here and it's still sitting on all of its cash, which is not a bad place to be if there's a lot of uncertainty out there. But I need to get it cheaper for me to want to get into Berkshire Hathaway. But that's another stock that I know many of you have owned over the long periods of time. And it has done very well for its shareholders. So let's recap the lessons. Start early, maximize the match. Invest 100% in equities. Ignore all other noise. That's how you get $1,000,000 Roth IRA. Also on a side note, Ted believes that the government should make changes so people like him cannot get a $500 million Roth IRA because remember he had 269 million in it a number of years ago. It's Got to be much higher now. Power of compounding. And I'm kind of scared to know what it could compound to. If he lives to be 90 and he doesn't believe that the Roth was created to have people like him, you know, keep all this money in there and not be taxed on it. So. But that hasn't happened. So for the rest of us, we can try to get the millions in our Roth IRA and, you know, really maximize that account. So tickers again, we had intuitive, surgical, but it's not a value. Isrg is that ticker Ross Stores. That's an interesting one. That's on the list of the 30 best performers R O S T over the last 10 years, that stock is up 281%. It is beating the S&P 500, up 220%, but a lot of its big gains were earlier on in its career as well. It's 25.1% annualized, and it was number seven on the list from 2020 as one of the top performers there. Then we had Microsoft. MSFT is the ticker there. We talked about Starbucks, sbux. It's not cheap, it's not expensive. It's kind of in no man's land. Earnings are on the decline. They're trying to turn it around. We'll see. But the stock is in the negative over the last five years. As a result, not much of a value right now. Much more of a trap. Berkshire Hathaway BRK B for that one. And then, well, we talked about, you know, all the mag sevens. I'm not going to go into all of those tickers you already know, but these are good lessons to know. That's why I wanted to cover it again on this podcast. For those of you who haven't heard the story of ted's multimillion dollar Roth ira, it is an interesting story. Unlike Peter Thiel, who put his Roth IRA into, like, pre IPO shares of Facebook and PayPal, and that's how it became a billion dollars. TED actually did what the rest of us could do if we were genius stock pickers. But even if you just did the S&P 500, we can do that too, and the result would have been outstanding as well. So keep those things in mind. I like to see these kinds of stories because it energizes me to keep on track, to try to block out the noise when we have it and to just keep investing and trying to find those good and great companies out there, the rare ones that make these lists that are able to grow their earnings year after year that dominate their markets as many of these do, and that's where you get these outstanding results. So happy investing everyone. On the value side. Think long term, get that power and magic of compounding and grow those IRAs into what you want them to be. As always, you can find all of the value investing podcasts on Apple. We're on Spotify, we are on YouTube on our own account, on Zach's podcast account on YouTube. There's no video but you can listen to the audio there. With almost all of our podcasts there, just subscribe, hit like on some of these videos so that YouTube sends them out to more people. And as always, I'll be back next week with some more value stocks this
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