My father, Isaiah Sol Dorfman, was a World-War-II spy, a labor-relations lawyer, and a lifelong stock-market investor. His interest in the market was contagious.
When I started buying stocks, he examined my portfolio and said, “I think you’ve done well in picking your stocks. Too bad you didn’t have enough money for it to make a difference.”
That was Dad, unusually frank. Twenty-two years ago, when he turned 96, I wrote a column on things he had taught me about investing. It got more response than any column I’ve written. So, let’s revisit the topic.
Churchill, Stalin
When he was a spy, my dad’s job was to recruit native German speakers who had fled Germany to go back in and report where the factories were and what they made. The idea was to help select bombing targets.
His cover job was with an organization in Sweden that aided German refugees. A big question was whom should he approach?
To help him decide, he kept wooden statuettes on his desk: Winston Churchill, Franklin Roosevelt, Adolph Hitler and Joseph Stalin. (I still have the statuettes.) Roosevelt and Churchill were at the front, Hitler and Stalin at the back.
Some people asked, “Why are Hitler and Stalin in the back?” From that, my father knew not to even hint around. But if someone asked indignantly why there were statuettes of Hitler and Stalin, he might gingerly tiptoe into the recruitment process.
In the stock market, it’s important to look for similar clues. For example, you can watch insider purchases and sales. You also can look at the acceleration or deceleration of dividends and stock buybacks.
Persistence
When Dad went into law practice, he wanted a phone number ending in two zeroes. The phone company said none were available. Dad had his staffers’ phone every number ending in double-zero in the Chicago area. Then he reported back to the phone company which ones were unused.
He got his number.
How does persistence help in the stock market? I think the answer in stock research is to keep digging until you find the information or insight you’re seeking.
Boxing gloves
My two brothers fought frequently, and not just with words. My parents, hoping to make the process more civilized, decided to get them boxing gloves. My brother Tom, who was athletic and loved sports, was excited. He figured he could easily out-box his bookish older brother Paul.
Paul came at Tom like a windmill. The contest was over almost before it began.
The stock-market lesson: Sometimes finesse is no match for raw force. Don’t try to be too cute.
Tires in space
When I was 13, Dad said he was going to buy a stock for me, and asked me what I wanted. A space stock, I said. He bought General Tire, which had some aerospace operations.
This was not what I had in mind, but there’s a lesson here. If you want to buy into a glamorous industry, see if you can find something in a plain brown wrapper. It costs a lot less that way.
Straight talk
In a labor negotiation — indeed, in any negotiation — establishing trust is important. Dad tried to engage in straight talk. And he didn’t paper over genuine differences. It’s best not to pretend that everyone’s interests are the same. Instead, he sought to lay out both sides’ goals, and seek a compromise.
How does this apply to the stock market? You have to give up something to get something. For example, you may have to give up a little growth to get value, or vice versa. Don’t pretend there is such a thing as a perfect stock.
Seeing around corners
When he entered the University of Chicago law school in the 1930s, his advisor asked him what kind of law he wanted to study. “Labor law,” my dad said. There is no such field, the advisor said. “But there’s going to be,” my dad replied.
The application to the stock market is obvious. Less clear is how to cultivate that ability to see around corners. One way is to pay close attention to great investors such as Warren Buffett or Sir John Templeton. A little of their intuition may rub off.
Rowboats
Dad felt he should drop off his agents in person on the coast of Denmark (occupied by Germany). He did this around midnight, preferably on stormy nights, in a rowboat, evading German searchlights.
I don’t have that kind of courage, and I wouldn’t suggest the courage of a successful investor is similar to the courage shown in war. However, courage is important in investing. You have to be willing to go against the crowd, to risk your prestige, your clientele and perhaps your job.
Playing it safe? That’s the road to mediocrity.
