We have been reading about long-term investing for some time now. So, we thought of sharing a fantastic story that became a part of case studies for financial investors.
Before we share the story, here is a Warren Buffet quote that sums up our sentiments exactly.
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Our story began in the unknown town of Quincy, Florida in the middle of the great depression in 1920. The story tells us how a relatively small town became one of the richest in America. Quincy is the Secret town of Coco-Cola millionaires even today.
During the great depression banker, Mark ‘Pat’ Munroe found the townsfolk willing to spend their last cent on a chilled glass of Cola even when they struggled to survive every day. Pat realized, that despite the consumer demand, brand image, revenues, and favourable market position Coco-Cola enjoyed, it was still trading lower than cash in the bank, and the shares were cheap. So, he invested in Coco-Cola but didn’t stop there.
He advised his customers and neighbours to invest in the company and then hold onto the shares no matter what happened. As a trusted banker, people followed his recommendations and bought equity shares in Coco-Cola. He even offered loans to depositors who were willing to invest.
Munroe’s strategy paid off. His idea of convincing the townsfolk to invest and keep investing when the market was down; saved the town when the rest of the U.S. was struggling to make ends meet.
The Coco-Cola dividends helped new shareholders survive the downturn even when their crops failed and every economic crisis after that. As a result, Quincy became the richest town per capita in America with at least 67 residents called the Coco-Cola millionaires.
These millionaires amassed fortunes from these early shares and passed them on-to future generations. A visit to this town and you will find several signs of Coco-Cola’s legacy over the years. The bank where this story began has Coco-Cola on display. As of 2009, the bank had a massive 65% of its trust assets under management still invested in Cola.
Can you guess how much a 1919 share would be worth?
One share of Coco-Cola bought at $40 in the 1919 IPO is worth more than $10 million, including dividend reinvestment. The investment would yield $270,000 in pre-tax cash dividends, sent to investors every quarter. These earnings were six times the average American earnings. Amazing what long-term investing can do for you. Remember -the magic of compounding is at play here.
What was different about Quincy?
In Quincy, the residents ignored the stock market volatility completely. They focused only on the profits Coco-Cola generated and the percentage of that profit distributed as dividends.
The people continued to buy the stock as long as the profits and dividends increased each year and there was no change in the competitive position of Coco-Cola. But they did not sell the shares -a staggering 102 years since the public offering in 1919. This growth is what the phrase ‘it only takes one good idea in life to get rich means.
How does this story help YOU?
We have very few stories like Pat Munroe’s town of Quincy and its millionaires in India. A shining example is Wipro Ltd, which has generated returns better than Coca-Cola but finding the original shareholders except for the promoters today is not easy. Stories of how Rs. 10,000 invested in Wipro pre-independence has grown multi-fold, while the dividend income is multiple times the original investment, which is lost in the drama of buy and sell calls put out every day. Wealth creation is possible only if YOU consider long-term equity investments.
Does this story resonate with you? Would you prefer to be a long-term investor? If yes, subscribe to our 5 in 5 Wealth Creation Strategy today
The information and the stocks mentioned in the article are just for information purposes only. A reader/investor/trader should not consider it a buy/sell/hold recommendation from Research & Ranking.
Read more: How Long-term investing helps create life-changing wealth – TOI.