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Alan Stevens |

Paul_McCartney_Dublin_2010.jpgWho is my pick for a great value investor to emulate? Sir Paul McCartney.

I know, I know, I’m supposed to respond with Ben Graham or maybe Warren Buffett, but McCartney is a great example of how to be successful through value investing, and one whose approach is far more accessible to the average investor - anyone can apply Paul McCartney’s lessons for investing success (and no, step one is not, “launch one of the biggest bands in the world.”).

So how did he do it? Paul found initial success while still in his early twenties as a member of the Beatles. Other members of the band were buying Rolls Royce limousines and acquiring financial advisors, but Paul told NPR in an interview that he knew nothing about stocks, bonds or real estate. He was wary of placing his newfound money with intermediaries who wanted him to invest in things he didn’t understand.

It was about that time that he heard about a small music publisher for sale, and suddenly a light came on for the young songwriter. He might not know about stocks or bonds, but he knew about music and what made a song marketable. He felt comfortable valuing a catalogue of songs and music rights. Confident in his expertise, he bought the publisher and spent the next four decades reinvesting his earnings and amassing one of the world’s great collections of songs and music rights on the planet.

Baby, You're a Rich Man

Today MPL Communications (McCartney Productions Limited) boasts a catalogue of over 25,000 songs and the publishing rights to productions like Annie, A Chorus Line, Guys and Dolls and Grease. Just one song, Wonderful Christmastime, earns him almost as much in royalties each year as the entire Beatles catalogue combined.  

Paul became rich through his association with The Beatles, but he became one of the world’s wealthiest men by focusing his investments within his expertise – where he had the confidence to act boldly. That’s all value investing is: figuring out what something is worth and then paying substantially less. It’s a lot easier to do when you understand the thing you are trying to value. This is the story I tell people whenever they ask my view on a biotech stock whose name they can hardly pronounce.

 

 

Alan Stevens is Managing Director of Research and Portfolio Management at Lyons Wealth Management LLC, a Florida-based subadvisor to several mutual funds. He serves as Portfolio Manager for Catalyst/Lyons Tactical Allocation Fund and is Co-Portfolio Manager for Catalyst/Lyons Hedged Premium Return Fund. He also manages several separate managed account strategies and alternative asset funds, including Lyons Tactical Overlay Program. He holds his MBA from Harvard Business School and a BA from Lake Forest College.

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