In this podcast, Motley Fool senior analyst Ron Gross discusses topics including:
- Getting inspiration from a sitcom character.
- Buying his first stock from research in an investing newsletter.
- His enduring admiration for Costco.
- The undefinable-but-real value of the “Buffett premium” when examining Berkshire Hathaway’s business.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
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This video was recorded on Nov. 16, 2022.
Chris Hill: We’ve got a sneak preview of coming attractions. Motley Fool Money starts now. I’m Chris Hill and let me tell you what we’ve got coming up. On Friday’s show, we’re going to have a look at the major retail earnings this week, as well as an interview with Chewy CEO Sumit Singh. On Saturday, we’ll bring you the podcast that we recorded in front of a live audience earlier this week at our member meetup. On Sunday, a conversation with Mark Cuban. If you’re a fan of Shark Tank, you’re not going to want to miss it.
Just like public companies have annual meetings, so do private companies. For the next couple of days, my company, The Motley Fool, we’re gathering for our annual meeting. We’re going to be taking Thursday off, but today, I wanted to share a fun conversation that I had with an investor you’ve heard from a lot over the past decade: the one and only Ron Gross. We dig into how he first got interested in investing, the influence of growing up near New York City, his biggest holding, how he got his kids interested in investing and a lot more. I really enjoyed this conversation and I hope you do, too. Do you remember like how you learned about investing? How old you were when you started becoming interested in investing?
Ron Gross: Family Ties, Alex P Keaton.
Chris Hill: Really.
Ron Gross: Swear to God.
Chris Hill: I remember that show. Walk me through it.
Ron Gross: He was a good kid. He would talk about economics and the stock market all the time. Something about him in that show, I was like, “That seems really interesting to me. That seems cool.”
Chris Hill: Were you of high school age at that point?
Ron Gross: Yeah. Maybe middle school. I can’t remember. My dad was in finance.
Chris Hill: What did he do?
Ron Gross: He is more of a CPA than an investor. In fact, I don’t think he’s ever owned a stock in his whole life.
Chris Hill: Really.
Ron Gross: Yeah and when I got to college, I was a triple major, finance investments and entrepreneurial studies and I didn’t know if I wanted to be an investment banker or an investment manager and so just that evolved.
Chris Hill: You grew up outside of New York City?
Ron Gross: Right.
Chris Hill: There’s that natural tie, you grow up in a world where working on Wall Street is very much a thing and very much at least an option for younger people.
Ron Gross: For sure. Yeah, and I went to a college, Babson, you can’t study anything but business. It’s a bunch of nerds running around with The Wall Street Journal underneath their arms being all like thinking they were hot because they’re reading The Journal and just talking about business all day long.
Chris Hill: I was on the campus recently because my nephew was an assistant coach for the basketball team and, you graduated in 1990?
Ron Gross: Yeah.
Chris Hill: I was at Boston College while you were at Babson. We may as well have been in two different states because Babson is such a beautiful campus.
Ron Gross: It’s really nice.
Chris Hill: When I was over there, I just remember thinking, “I don’t think I ever set foot on this campus.”
Ron Gross: Wells is a dry town. You can’t even get alcohol except on canvas. You wouldn’t even want to go to Wells.
Chris Hill: You were watching Family Ties? How old were you when you bought your first stock and what was it?
Ron Gross: It was a simpler time, Chris, it was 1990. It was shortly after I graduated college. I, interestingly, enough, subscribed to a newsletter. I don’t recall if it was a biotech newsletter or a tech newsletter, but a company caught my eye called Summit Technologies. The ticker at the time was BEAM, B-E-A-M. Don’t confuse it with the current Beam. It’s a totally different company.
Chris Hill: Isn’t the current beam, Jim Beam?
Ron Gross: No, it’s a company called Beam Therapeutics, which is in the gene therapy space. They were manufacturer of lasers to correct eye problems, LASIK, I think is basically what we know it as today. That caught my eye. My very first stock. I don’t recall how long I owned it for, but it wasn’t more than a year or two. In 2000, Nestlé‘s Alcon Labs bought it for about $900 million in cash, which I think probably made it a loser. But I had sold the stock long before that. But interestingly, before I got bitten by the value investor bug, my first real investment was a biotech.
Chris Hill: That’s amazing to me, knowing you for as long as I have and knowing how value investing runs through your veins. But I would not have guessed a biotech stock. It’s also interesting to me that this was something that you researched yourself. This was not, my dad helped me pick it out, or it was just something that I was interested in, I saw an ad on TV. You actually did the research.
Ron Gross: I had the newsletter do the research for me, but I took the time to read and subscribe and out of however many picks that newsletter put forth in that given month, I chose that one.
Chris Hill: You sold it because it just wasn’t working out?
Ron Gross: I honestly can’t remember. We’re talking 30 years ago. I’m sure it was only a couple of $100 at most, and maybe I just wanted to buy something different. There’s also honestly at chance I made like two bucks on it and I was like, “That’s pretty good. I’m going to buy something else now.”
Chris Hill: What’s the old saw like, no one ever went wrong taking a profit? Take your two dollars. What’s the worst stock that you ever bought and what did you learn from that experience?
Ron Gross: Painful. I’m going to give you two, unfortunately, and it’s because they both went bankrupt while I still owned them. I didn’t bail. I held on. First one was when I was a hedge fund manager and that was around 2004, is my guess and the company was Concord Camera, ticker symbol LENS, L-E-N-S at the time. They’d mostly made disposable cameras, the kind that when you go to a wedding, they sit it on the table and they encourage you to take pictures of what’s going on. Chris, I’m not sure if you’re aware, but digital photography has become a big deal. In fact, we all carry in our pockets nowadays a pretty powerful digital camera and I didn’t really recognize that that was going to be occurring.
They had a tremendous balance sheet. I actually fell in love with the balance sheet rather than the income statement, which is a lesson to learn. I held on to the end and they went out of business. The second company is more recent and it’s a company I’ve recommended at the Fool starting around 2008 and then later again and that was Horsehead Holdings, ticker symbol ZINC, producer of zinc and zinc-related materials. Basically what happened is there is they put a huge capital expenditure program in place to build out their infrastructure at the exact same time the price of zinc plummeted. They couldn’t make ends meet.
They filed for bankruptcy in my opinion too early. In fact, I believe I participated in a class action lawsuit as a result and maybe got a few bucks in the end, they reemerged, they’re a private company now known as American Zinc Recycling. But that was painful for members of The Motley Fool that followed my advice on that. It was painful for me personally because I owned the stock as well. But it was a really good lesson in terms of investing in commodity companies. You have to do it right at the right time of the cycle. You have to make sure that everything else is in place. Like a capital expenditure program. You have to make sure that they can pay their bills if times get tough and if the balance sheet isn’t strong enough to do that, you really have to just take a small position or no position at all.
Chris Hill: Someone asked me recently, do you invest in commodities? I just very quickly was like, “Oh, God. No.” They were like, “Why do you say it like that?” I said, “It just seems tiring. It just seems exhausting.”
Ron Gross: It’s also a cyclical play for lack of a better word and just the word play is almost the opposite of investing. It’s not something that you’re proud owner of that you want to hold for 5, 10, 15 years. It’s more of just an investment.
Chris Hill: What’s the stock that means the most to not necessarily because it’s done the best or it’s your biggest holding, but maybe because of memories attached to it?
Ron Gross: There’s a few, but I think it’s got have to be Disney. I think it was the first stock I bought for each of my kids back in 2002, 20 years ago. I did it mostly because I thought it would be a good investment, but also really because I thought they would get a kick out of owning a small piece of company that they understood and really loved in a variety of different ways. Fast-forward 20 years later, they both still own the stock today.
Chris Hill: That’s great.
Ron Gross: I had to sell off some of their stocks to pay for college and things, but that was one that really for nostalgia purposes, plus I still like the company. I had them hold on,…
Read More: A Sitcom Character Inspired This Investor | The Motley Fool