Friday, October 29, 2021

The Oracle of Buffalo

I like to profile successful dividend investors, who come from humble beginnings, invest their savings patiently for decades, live frugally and end up making a difference in their communities.

One such example is Stephanie Mucha. She was a nurse, who invested in stocks for several decades, who ended up donating over $5 million to charity. The is called "The Oracle of Buffalo" for her savvy stock selections, and because she donated most of her net worth to charitable causes.

Stephanie was born in 1917 in a working class family. She dropped out of school, worked as a maid, until she trained to become a nurse. Her highest salary earned was $23,000/year, which she earned right before she retired in 1993. She worked at the VA hospital in Buffalo for over 40 years, earning a Purple Heart for “outstanding work as a nurse for veterans”

She married her husband at the age of 25 in 1948, who was twice her age however. He retired in 1958, and earned $6,000/year as a machinist. 

The Mucha’s lived frugally, and shared one car between the two of them. However, they also liked to generate alternative streams of income outside their jobs. They rented out two apartments from their house, which generated rental income.

Stephanie did have a keen eye for investments. She invested in Medtronic, after seeing how the company’s products can change lives. In a way, she followed the principles of Peter Lynch to invest in what you know based on your occupation and personal experiences. The amazing part is that these principles were not codified by Peter Lynch for at least 30 more years.

In 1958 she witnessed the first pacemaker being implanted in a dog by a local inventor, Wilson Greatbatch. This innovation led to to Medtronic manufacturing pacemakers.

Stephanie Mucha and her husband invested $255.50 worth of shares in Medtronic in 1961. They kept reinvesting the dividends, and held on to their shares for over 40 years. By 2007, the shares were worth $459,000.

Stephanie and her husband invested in what they know. In a way, they unleashed their own inner Peter Lynch. The case of Medtronic stock, which she observed during her normal job, is a prime example of following the principle of investing in what you understand.

Medtronic (MDT) is a dividend champion, which has managed to increase dividends for 44 years in a row.

Another example is the investment in companies such as Precision Castparts, Snap-On (SNA) and Illinois Tool Works (ITW). She recalled her husband saying, “You can’t build without nuts and bolts”, which inspired her to invest in these three companies. 

Stephanie noted this and other well-paying investments came from her and her late husband's realization that stock would boom in the area of life essentials, including other stock investments in Pfizer pharmaceuticals, Merck & Company, and Johnson & Johnson medical devices, among others. She also invested in Philip Morris Company, noting that the Economist points out population trends and that China is the largest consumer of cigarettes. Another big dividend came from investing in Aqua America, Inc., a water and wastewater utility company.

They invested in other companies, but unfortunately, it is hard to know everything that was in their portfolio. The couple did their research on their own, and did not need help from Wall Street.  This is due to the fact that a stockbroker advised them to sell shares of Intel in the 1980s. After that, Stephanie decided to not listen to traditional advice. 

Her husband died in 1985 and at that time the portfolio was valued at close to $300,000. After her husband died, Mucha, a self-taught investor, carried out their plan. She also retired in 1993, and started taking social security checks at the age of 70, which was around 1987 for her.

Stephanie was a patient long-term investor, who held on to her stocks for decades, through the ups and downs. She always reinvested her dividends. Her long-term focus was inspired by the fact that women live longer than men, which is why she knew she had to learn how to use money wisely. I am sure that her husband passing, played a role in this mindset.

Staphanie definitely had the mindset of a long-term investor, that manages to compound money for decades. She also deferred taking Social Security until the age of 70. She was generating close to $40,000 in Social Security and VA Pension by 2014. In addition, she was earning $675/month from a renter.

She didn’t own a computer, and placed trades over the phone. However, Stephanie did keep up with research, by reading Wall Street Journal, Barron’s, Forbes, The Economist and New York Times. 

By the last decade of her life however, she seemed to have started using the services of a financial advisor. Perhaps that was helpful to keep her investments in check. Most probably, this was done as part of her comprehensive estate planning process.

Stephanie used to say that: "You can't take money with you when you pass on,"

She had managed to donate over $5 million to different causes. According to my research, she never really took money from the investment portfolios. Rather, she lived off Social Security checks, and rent payments, after retiring. 

She donated $1 million each to the following organizations:

- University of Buffalo’s School of Dental Medicine

- Jacobs School of Medicine and Biomedical Sciences

- UB School of Arts and Sciences

- UB School of Engineering

- The Kosciuszko Foundation

While they couldn’t have children, she and her husband provided scholarships for 30 students of Polish heritage.

She was also active in the Greater Buffalo Memorial Society, a nonprofit educational organization that monitors the funeral industry for consumers, and served as its membership secretary. 

Stephanie died at the age of 101 in 2018. She was survived by her sister Mary Szymanski, and 23 nieces and nephews.

I love this story very much.

It shows that ordinary investors from all walks of life can become successful investors by:

- Investing in companies they understand

- Investing with a long-term focus

- Compounding capital and reinvesting dividends for decades

You do not need to be a millionaire to start investing. On the contrary, the best investors start small, and learn how to manage money when they do not have a lot at stake. However, the skill of managing investments is highly scalable. This is why the skills that help you invest your first $1000 or $10,000 are the same as investing through your first $100,000 or first $1 million or higher.

In addition, anyone with some patience and plain common sense can learn to be a good long-term investor. You also do not need a high income. In addition, it is never too late to start investing. 

For Stephanie Mucha, she never made a lot of money or had formal training as an investor. She didn’t sell when the market declined. She knew as a long term investors that over the long term, stocks can produce significant wealth. She also didn’t start investing until her late 30s – early 40s.

I believe that the most important part of investing is getting started. You should not despise the days of small beginnings, but rather start early, and try to take maximum advantage of compounding. When you are younger, time is your most important asset. If you compound for 50 years, even a small amount of capital would turn into large dollar amounts. For reference, at an annualized rate of return of 10%/year, $1 invested turns into $117. Historically, the US stock market has returned about 10%/year, annualized over long periods of time. Investing in productive assets, such as businesses, is a massive wealth-building tool that leverages the massive tailwind of innovation, entrepreneurship and hard work of millions of people that capitalism unleashes worldwide.

There are many other lessons of course, notably to try to live within your means, and to look for ways to increase income. Earning money through salary is great, but if you can generate side income from renting, or perhaps consulting, or pensions, or dividends, it can go a long way in increasing your savings rate. This can speed up your journey to financial independence. In addition, by having multiple streams of income, you are not going to be in trouble if you lost your job for example.

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