John Paul Getty Still Worth Studying Today
BY AL SHAMS / AJT //
Very few stock market observers have a full understanding of the stock market and financial history. I, for one, think a historical understanding offers a great deal of perspective during these uncertain times.
For example: What were the hot stocks of the 1950s, the 1960s and 1970s? What concepts drove their prices higher, and what led to their huge price declines?
For serious students of investing, the following names should have some meaning: Polaroid, Digital Equipment, Teledyne, LTV Corp, Kodak, Simplicity Pattern, Fairchild Camera, Control Data, University Computing, National Student Marketing, The Mates Fund, Fred Carr, The Enterprise Fund, James Ling and, finally, Recognition Equipment.
There’s a story and important lesson behind each of these names. I suggest serious investors take some time to research the businesses and corporations. And speaking of lessons, there is one more name that our young readers – those who have yet to reach 50 – will probably not recognize, but perhaps should take note of.
During the 1960s, John Paul Getty was widely considered to be the world’s richest individual. Getty made the bulk of his wealth in the oil industry as an independent oil producer. Unsurprisingly, his advice on money matters was widely sought, and as a result, he decided to write the book “How to be Rich,” in which he included a section on the “Art of Investment” through Wall Street.
In that section, Getty detailed several of his investment experiences as well as some of the basic principles he used in purchasing common stocks. Summarized here are a few of his most important ideas:
Don’t approach the stock market as a source of quick and/or easy profits.
Stock certificates represent an ownership interest in a business enterprise, not betting slips.
Buy sound, quality companies with high inherent value – companies with high per-share assets and/or good potential earning power.
Buy when everyone else is selling and hold until everyone else is buying.
Remember that during depressed markets, the stocks of many quality companies sell at a fraction of their per-share liquidation value.
Look with an objective eye for bargains in growth stocks that can be held to reap handsome profits over a period of years.
The following direct quote could very well summarize Getty’s investment approach:
“Sound stocks purchased for investment, when their prices are low and [they are] held for the long pull, are very likely to produce high profits through dividends and increases in value.”
Getty’s approach seems very similar to that of other investment greats: John Templeton, Warren Buffett, Ben Graham, etc. It’s a very interesting comparison when you consider Getty approached the market as a businessman, whereas Templeton and Buffett approached it as outside investors.
It’s also interesting to note that much of Getty’s stock market investments were made in the 1930s and 1940s – a period of depressed values, similar to our current period.
Finally, consider that another oil man, Boone Pickens, approached the stock market in the 1980s in the same manner as Getty. He strongly believed he could buy oil cheaper by acquiring the shares of major oil companies than by drilling for oil.
It’s curious how history seems to repeat itself.
Many people have a memory of what has transpired during the last 10 years, but few have an understanding of investment trends 30 to 40 years ago. That insight is invaluable.
Al Shams is a Sandy Springs resident a former CPA and an investment professional with more than 35 years industry experience.
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