Forbes estimates that Beanie Baby creator Ty Warner’ net worth is $2.7 Billion. This is an amazing achievement considering a bulk of it was earned during a 3-year time frame selling a $5 per unit stuffed animal.
The fact that Ty Warner’s Beanie Babies were able, without the benefit of a single ad, to outpace the combined annual profits of the largest toymakers in the world for even a few years is unprecedented.
To illustrate how quickly the bubble grew - In 1995, Ty Warner’s company Ty Inc had sales of roughly $28 million. In 1996 sales were $280 million with $90 million in pre-tax income. By 1998, Ty Inc sales reached $1.34 billion with pre-tax income of $700 million.
In Ebay’s 1998 Annual Report it disclosed Beanie Babies as material. “At times, approximately 7% of our listings involved Beanie Babies”. Furthermore, it was said that 10% of Ebay sales at the time were derived from Beanie Babies.
In a deal with Major League Baseball, teams could give away 10,000 Beanie Babies at a game of their choosing. During these giveaway games, attendance rose 37.4%. The giveaways did more for ticket sales then any promotion in MLB history.
In a McDonald’s promotion, McDonald’s gave away 100 million Beanie Babies in happy meals in 3 days. Adults were going through the drive-thrus ordering 100 happy meals at a time, throwing out the food or telling the attendant to keep the food, and reselling the Beanie Babies.
So how did he do it?
He bucked the trend of the toy industry which said a $5 toy could never become a collectable. Warner would retire (discontinue) certain animals to create demand in primary and secondary markets.
He refused to sell to big box retailers. He didn’t want to see his Beanie Babies sold in crates. He only worked with small independent stores and gift shops in airports because it would produce a secondary effect of having them flown around the world to help spread his brand.
His lack of normal distribution seemed to spur on demand even more by exacerbating supply shortages.
He was obsessive about quality and would design almost every animal himself and spend months each year in China picking out fabrics.
The fad only lasted a few years and Warner was smart as he reinvested profits into real estate and buying hotels.
He bought the Four Seasons in New York, Biltmore Santa Barbara and Coral Casino Beach and Cabana Club, Sandpiper Golf Course, Kona Village Resort, and others.
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Frank Perdue took Perdue Farms, a small local company his father started, and grew it into a multi-billion-dollar business.
Mitzi Perdue tells this amazing story about her late husband:
👇👇👇
1) Frank had a tremendous head for figures. He treated numbers the way a doctor would treat an MRI: numbers enabled him to see and understand what was going on deep inside the business, plus numbers were a very quick way of detecting if something was going wrong.
2) I need to share something that happened when Frank was 85, maybe half a year before his passing. We were visiting Massachusetts General Hospital to assess how he was handling the Parkinson’s disease that was soon to take him.
You don’t hear much about full-time private investors because publicity doesn’t benefit them. In fact, publicity hurts them. Full-time private investors like the fact that even family and friends don’t quite know what they do for a living.
They like the fact that they’ve built up an extensive knowledge level in a niche of the market where it doesn’t benefit them to arm-wave their successes.
Microcap investors are mainly retail investors. Some of the best microcap investors I know are small business owners. They understand the complexity, volatility, and nuances of running a small business. Microcap isn’t an institutional asset class, it’s an entrepreneurial one.
Most "financial professionals" think you're dumb for investing in these small companies, but that is only because they can only buy them after they go up 10x, are 70% institutional held, and have 10 analysts covering them.
The financial machine loves lemmings.
The haters will say microcaps are sleazy slimy uninvestable companies. Yes, plenty of those. But a lot less than VC. The nice thing is most file audited financials with the SEC, and if you know how to read financial statements you can cut out a lot of the risk.
I've always loved Druckenmiller because he says the complete opposite of what they teach you
"The few times that Soros has ever criticized me was when I was really right on a market and didn't maximize the opportunity."
Stanley Druckenmiller
"The first thing I heard when I got in the business was, 'Bulls make money, bears make money, and pigs get slaughtered.' I'm here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig."
"Earnings don't move the overall market; it's the Federal Reserve Board... focus on the central banks, and focus on the movement of liquidity... most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets."
I learned investing by losing money, making it, losing money, making it. This is when you develop a set of experiences that are unique to you that define your investment strategy. Don’t be afraid to learn investing by investing.
Concentrating on just a few stocks/businesses early in your investment journey is a great way to learn investing because the outcomes are extreme. You learn what you don't know quickly. You feel the intense greed of a win, and the anguish of a loss.
Of course few in “high finance academic circles” like admitting it because no one wants to promote recklessness but Charlie gets it.
“Extreme outcomes — good or bad — often educate best.”