Tuesday, June 14, 2011

By George, I Think He Got It Right

The subject of today’s post is the By George Mutual Fund (BGMF). You have never heard of it because it is one of the most exclusive funds in the world, yet it is a part of my portfolio. How was I able to get into this elite investment? Well it just turns out that I am the only investor and thus own all the money remaining in the fund.

The BGMF was created by my grandfather George around 40 years ago. It consists of shares in 20 common stocks. When he died 30 years ago, the fund was inherited by his children. While I assume that the other shares of the fund have long been sold off, the portion inherited by my mother remains largely intact. My mother owned the BGMF for 30 years, the only decisions she made was to redeem shares for cash when offered due to buybacks or transfers. Other than that, the BGMF was not “managed” or intentionally varied in 40 some years. I always wondered why my mother didn’t sell it all due to the work involved handing dividend checks and all the paperwork and tax issues that come with direct stock ownership.

The Man Behind the BGMF

George the Businessman

George obtained his wealth through hard work. He started off as a teacher (I teach part-time and several cousins are teacher/educators, funny how that works), but soon found his passion and opened a small grocery store. George was an excellent store owner. His outstanding people skills combined with natural business acumen resulted in continuous success.

His store grew in size throughout the years and George had some money in the bank. At this point most people would have opened more grocery stores in order to gain more wealth, but not George. I think that George loved what he was doing, which was personally connecting with his customers, personally connecting with his employees and cutting meat. More stores would mean that he would be managing store, and not doing what he truly loved. This brings us to:

Life Lesson #1: Find out what you love doing and then do it well as you possibly can.

George the Person

I have to say something about George the person. George was very generous. My mother told me stories about how he let his customers run up credit during The Great Depression when they didn’t have jobs and he had no assurance he would ever be paid. He also would give away soup bones to others who were hungry.

Life Lesson #2: Having the money isn’t as important as helping others with your money. (If you don’t agree with this one, I suggest you give a try and see what happens)

George’s people skills were extraordinary. I watched him interact with customers in the store, but was too young at the time to realize just what was really happening. But I now see the impact based on what people said about my mother’s people skills and my interactions with my uncles (one still living). The most important person in the world to my uncle(s) is the person he is talking to at the time. You just feel after having a conversation (about anything) with these guys. That’s a special gift and they got it from George.

Life Lesson #3: Treat everyone (no matter income, race, religion, appearance, etc.) with the utmost respect. Everyone you interact with should be important to you.

George the Investor

So instead of investing in more stores, George invested in the stock market. That way George got to continue doing what he loved and to increase his wealth by doing what he liked (investing in the stock market). And he was good at it.

The incredible thing about the BGMF is how solid it is after 40 years. This is the mother of all “buy and hold” strategies. As far as I can tell, the portfolio when George stopped managing it had stock in 20 companies. It has 20 companies today. Only one company went out of business and one company spun off a new company, so there are still stocks of 20 companies in the fund today.

Many of the companies in the fund are strong blue-chip stocks. There are a few “weak sisters”, but that is to be expected. George believed in diversification. Of course if he had bought only the five best stocks, the fund would be worth much more today. But if he had bought the five worst, it would not be worth very much at all. George knew he would make mistakes so he spread the risk.

Life Lesson #4: You are not going to be right all the time, so make sure you prepare for those times when you will be wrong. In investing, that means diversify, diversify, and diversify some more.

The bottom line is that George was one great stock picker. To put together a portfolio that has withstood the changes and crises over the past 40 years and is so solid today is remarkable. When I told my broker (who now services the account) the history of the BGMF, he was speechless. I have even more respect for George because in doing the research for this post I discovered that the worst performing stock in the fund is not a stock that he bought, but the spinoff mentioned earlier.

What Now?

So upon the death of my mother a year ago, I became sole owner and now manager of the BGMF. What to do, what to do? Me. The person who bought into Braniff Airlines (bankrupt), Storage Technologies (bankrupt), Home Centers (bankrupt) and Gliatech (bankrupt). It would seem that the BGMF could be in grave danger.

To Be Continued ………..


  1. Interesting! I think the hardest thing for anyone is to let an investment "sit" and have time work for you.

    Many of my financial planning clients can't stand it when an investment is down and want to sell it. I tell them that it's important to "not freak out."

    Looking forward to part 2...

  2. Hey I just saw this post. Great story. Would you mind telling us the performance vs. the index? Also, did he have much of a methodology to what he did, like reading reports or looking at value line? Or was he pretty much buying blind.

    1. I don't know the performance vs. the index, but it the performance has to be superb. George died when I was 24 and I never discussed this. I think he had a strategy, but I don't think it was technical - you should read Part 2 - George Is Still The Boss. If you e-mail me, I will tell you the top holding - donake@outlook.com