A Buy and Hold Billionaire – Stewart Horejsi – Week In Review

A Buy and Hold Billionaire – Stewart Horejsi

A Buy and Hold Billionaire – Stewart Horejsi. I like reading about successful investors, and periodically I write about them as well. I last wrote about a One Stock Millionaire, Russ Gremel, who made his money buying $1,007 of Walgreen Boots and holding it for seven decades. His $1,007 eventually became ~28,000 shares and ~$2 million. Today, I am writing about Stewart Horejsi. He is a buy-and-hold Berkshire Hathaway investor and billionaire who bought Berkshire Hathaway stock in 1980, and the rest is history. He is not a strict dividend millionaire since Berkshire Hathaway does not pay a dividend, but his story is interesting.

I have a whole series on Secret Dividend Millionaires and have written about 12 to date. Unfortunately, these people are often discovered after they die since they have no children, outlived their spouse, and typically left their wealth to charity. I have also posted 9 Millionaire Interviews, which are about retail investors who blog and are focused on investing and dividends. In general, both groups have let time work to their advantage and relied on the power of compounding to build wealth. 

Who is Stewart Horejsi?

Stewart Horejsi was born in 1937, but the exciting part of the story begins in the early-1960s. He graduated from the University of Kansas in 1962 and returned home to Salina, Kansas, to work in his family’s welding company, Brown Welding Supply LLC. By 1980, Stewart Horejsi was running the welding company.

How Did Stewart Horejsi Become a Billionaire?

In 1980, Stewart Horejsi started to invest money into Berkshire Hathaway. He initially bought 40 Class A shares at $265 per share for a total of $10,600. He then bought 60 more Class A shares at $295 per share about two weeks later or $17,700. Finally, about a month later, he purchased 200 shares at $330 per share or $66,000. The total of his purchases was $94,300 at this time. The shares alone would have made Stewart Horejsi rich today.

But Stewart Horejsi continued to invest. He essentially took the profits from the family’s welding business and kept buying Berkshire Hathaway stock. He has admitted to admiring and trying to emulate Warren Buffett. So I guess he did the next best thing in buying the stock. He kept adding to his holdings and at one point owned 5,800 shares. He held onto his shares until 1998, when he sold 25% of his position when Berkshire Hathaway reached a high in 1998 of about $78,000 per share.

What is Stewart Horejsi’s Net Worth?

Today, Stewart Horejsi reportedly owns 4,800 Class A shares of Berkshire Hathaway. At the current stock price of $430,160, his shareholdings make Horesji’s net worth over $2 billion. He manages his investment through his firm Boulder Investment Advisors LLC. He reportedly also owns Wells Fargo (WFC), International Business Machines (IBM), and Walmart (WMT). His total net worth is likely close to $2.5 billion, according to Forbes.

Final Thoughts on A Buy and Hold Billionaire – Stewart Horejsi

I like reading about dividends and buy-and-hold millionaires and billionaires. It demonstrates that it is possible to achieve a high total net worth by investing in stocks. Furthermore, it proves that you don’t need to be an investing genius to do so. Berkshire Hathaway made Warren Buffett and Charlie Munger very rich, but it also made many other early investors very rich or even just rich. Even Berkshire Hathaway’s stock can lose money in the short-term over time, but over more extended periods, the returns are great. Essentially, these people bought what they knew and held on despite bull and bear markets. Of course, most of us won’t achieve this kind of total return or billionaire status like Stewart Horejsi. But buy and hold, and dividend growth can lead to solid long-term total returns.

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Chart or Table of the Week

Today I highlight Clorox (CLX). I highlighted Clorox only several weeks ago and pointed out the stock is not yet undervalued but to keep it on your watch list. Since then, Clorox reported Q2 2021 results that missed revenue and EPS by a large margin. The stock price plunged in response. The stock price is down about (-18.1%) year-to-date and (-29.6%) in the trailing year. Simultaneously, the yield went up and is now about 2.85%. This value is about 0.35% over the trailing 5-year average. Clorox benefitted from a tailwind during the pandemic as everyone bought bleach. This is slowing. The stock is a Dividend Aristocrat with 44 years of dividend growth as well. The stock is now undervalued by some metrics but not yet a P/E ratio. The screenshot below is from Stock Rover*.

Dividend Increases and Reinstatements

I have created a searchable list of dividend increases and reinstatements. I update this list weekly. In addition, you can search for your stocks by company name, ticker, and date.

Dividend Cuts and Suspensions List

I updated my dividend cuts and suspensions list at the end of July 2021. The number of companies on the list has risen to 527. Thus, we are well over 10% of companies that pay dividends, having cut or suspended them since the start of the COVID-19 pandemic.

There is one new company to add to the list this past month. This company is Shell Midstream Energy Partners L.P. (MPLX).

Market Indices

Dow Jones Industrial Averages (DJIA): 35,209 (+0.78%)

NASDAQ: 14,836 (+1.11%)

S&P 500: 4,437 (+0.95%)

Market Valuation

The S&P 500 is trading at a price-to-earnings ratio of 34.6X and the Schiller P/E Ratio is at about 38.5X. These two metrics up in the past weeks. Note that the long-term means of these two ratios are 15.9X and 16.8X, respectively. 

I continue to believe that the market is overvalued at this point. I view anything over 30X as overvalued based on historical data. The S&P 500’s valuation came down as companies in the index reported solid earnings lapping a Q2 2020 that had depressed earnings.

S&P 500 PE Ratio History

Shiller PE Ratio History

Stock Market Volatility – CBOE VIX

The CBOE VIX measuring volatility was down over 2 points this past week to 16.15. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 index options. It is commonly referred to as the fear index.

Fear & Greed Index

I also track the Fear & Greed Index. The index is now in Fear at a value of 36. This metric is up 12 points this past week.

There are seven indicators in the index. They are Put and Call Options, Junk Bond Demand, Market Momentum, Market Volatility, Stock Price Strength, Stock Price Breadth, and Safe Haven Demand.

Market Momentum indicates Greed. The S&P 500 is 7.08% over its 125-day average. This value is further above the average than is expected over the past 2-years.

Junk Bond Demand indicates Greed. Investors are accepting a 1.99% yield over investment-grade corporate bonds. In addition, the spread is down further from recent levels indicating that investors are taking on more risk.

Market Volatility is set at Neutral. The CBOE VIX reading of 16.15 is neutral.

Put and Call Options are signaling Fear. In the last five trading days, put option volume has lagged call option volume by 54.88%. However, this is still amongst the highest level of put buying in the past two years.

Safe Haven Demand is in Extreme Fear. Stocks have outperformed bonds by 1.01% over the past 20 trading days. However, this is still close to the weakest performance for stocks over the past 2-years as investors move back into bonds.

Stock Price Breadth indicates Extreme Fear as declining volume is 1.89% more than advancing volume on the NYSE during the last month. This indicator is near the lower end of its range relative to the past two years.

Stock Price Strength is signaling Extreme Fear. The number of stocks hitting 52-week highs compared to those hitting 52-week lows is at the lower end of its range.

Economic News

The Commerce Department reported factory orders increased by 1.5% in June, following an upwardly revised 2.3% in May. The increase in factory goods orders was broad, with gains in machinery, computers, and electronic products, in addition to electrical equipment, appliances, and components. While bookings at Boeing helped orders for transportation equipment increased by 2.0%, motor vehicle orders were hindered by a semiconductor shortage dipping 0.3%. Shipments of manufactured goods increased by 1.6% in June after rising by 0.9% in May. Unfilled orders at factories increased 1.0% in June. Inventories increased 1.0%, following a 1.1% uptick in May. New orders for non-durable goods jumped 2.1% in June, following a 1.4 % advance in May. In June, orders for durable goods also climbed by an upwardly revised 0.9% after rising by 3.2% in the previous month.

IHS Markit’s US services final purchasing managers’ index dipped to 59.9 in July, the lowest value since February 2021, and down from the previous month’s 64.9. A reading above 50 indicates a majority of services firms reported an increase in inactivity. New business continued to rise in July and at one of the fastest rates since data collection began in October 2009. The cost of inputs used in services firms’ production processes remains high. Input inflation is being driven by higher fuel prices, increased payroll costs, and supply chain constraints.

The U.S. Bureau of Labor Statistics reported the unemployment rate dipped sharply in July to 5.5% compared to June’s 5.9% – 943,000 jobs were added. This gain is the biggest in nearly a year, as the number of unemployed fell by 782K to 8.7M. Job gains occurred in leisure and hospitality (+380K), with bars and restaurants leading the way (+253K), followed by hotels (+74K), and then arts, entertainment, and recreation (+53K). In addition, public and private education grew (+260K). Construction employment was up (+11K), and manufacturing (+27K). The only industry to lose jobs was retail (-5.5K).

Thanks for reading A Buy and Hold Billionaire – Stewart Horejsi – Week in Review!

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