I’ve never written up a profile of him, but one of these days, I’m going to get around to doing a full fledged admiration piece on the career of Tom Lewis who is best known for running the real estate investment trust Realty Income. Who knows, maybe I’ll try and see if I can track him down or leave a message with his secretary just to say, “Hey man, I don’t want anything from you. I don’t want to hassle you for any of your time. I just want to say I studied your career, and it was good.” I could see great businessmen in retirement appreciating something like that.
For those of you who have owned shares of Realty Income, you already know what it does: it pays out a dividend every month, and it went up every year Lewis was at the helm (and has something like a four decade streak of never lowering the payout). Lewis did two things in particular that, I think, made him a unique leader.
First, he avoided the risk to load the balance sheet with excessive debt. In the abstract, you would think that real estate companies would be super stable assets. You own dozens and dozens of properties, figure people will be renting the premises more often than not, take that money, and share it with your fellow investors.
That doesn’t happen as often as it should because real estate operators see someone taking on more debt, and in good times, growing richer faster, and can’t properly cope with the plaudits those peers are receiving. Tom Lewis always did his own thing, stuck to his strategy that was guaranteed to work long-term, and became the leader of one of the few large-sized REITs that did not have to cut the payouts to shareholders in 2008 or 2009. In 2009, a lot of vacations happened, tuition checks got cut, and discounted household merchandise got purchased because Realty Income kept paying its dividend each month. Tom Lewis is a big reason why the tradition continued.
The other thing Lewis did that impressed is that he frequently made acquisitions throughout his career that either improved the quality of the Realty Income portfolio or had a negligible negative influence on it. Yeah, I know it’s not Steve Jobs sexy. But a lot of people out there say, “I want an extra $200 million in assets under my belt, and I don’t care if we have to act a little trashy to get there.” Empire building is a seductive mistress when you find yourself the man at the top.
Lewis resisted that impulse, and that is another reason why Realty Income shareholders fared so well over the past two decades.
Anyway, all of that was a way too long prologue for this Tom Lewis quote I wanted to share with you:
“The American stock market is similar to watching a person walk up the stairs with a yo yo. People focus on the yo yo going up and down, while the real story is the consistent movement of the person up the stairs.”
How awesome is that?
And it’s so true. I can’t tell you how many articles I’ve written about on a specific stock, and then received a negative message from someone because earnings were less than some analysts on Wall Street expected and the stock temporarily declined a bit in price. I can’t even wrap my mind around the thought of going through life parsing and micro-analyzing the difference between $67 and $64 per share.
It’s funny. We all have an image of what kind of companies resemble the man walking up the stairs. If I handed you a pen and asked you to name ten companies that will be making more money ten years from now than today, I guarantee that you could get eight or nine of them right, with a good chance of you getting all ten. And yet, some people live their whole lives focusing on the yo yo. That is a shame, because successful investing demands removing that particular beam from your eye, Aesop style.