HOLD-’EM HERBIE
Amid stock market booms and busts, a Florida optometrist has beaten the odds to become a buy-and-hold billionaire.
It’s 9 p.m. on the last Saturday night of the 2018 Art Basel in Miami Beach. On the first floor of the palatial Versace mansion, the well-dressed and well-Botoxed are dancing to remixes of Michael Jackson’s “Beat It” and posing for Instagram by the mosaic-tiled emerald pool. Upstairs, in a VIP room decorated in a mélange of styles that marry classical Greek and Roman touches, a well-dressed septuagenarian named Herbert Wertheim is sitting in front of a plate of smoked-salmon toast topped with gold leaf and shaved truffles, and scrolling through photos on his iPhone— scenes from what could only be described as a wonderful life. There are fan photos of him cooking pasta fagioli with Martha Stewart, on the slopes with Buzz Aldrin and fishing in Antarctica. There are many with his wife of 49 years, Nicole, on the luxurious World Yacht, where the Wertheims now live part of each year. He calls these extracurricular activities “Herbie time.”
If it weren’t for his trademark bright-red fedora, Wertheim, who is an optometrist and small businessman, would look like the typical senior living it up in South Florida.
But Wertheim, 79, has no need for early-bird specials. What the photos don’t reveal is that Dr. Herbie, as he is known to friends, is a self-made billionaire worth $2.3 billion by ForbesÕ reckoning—not including the $100 million he has donated to Florida’s public universities. His fortune comes not from some flash of entrepreneurial brilliance or dogged devotion to career, but from a lifetime of prudent do-it-yourself buy-and-hold investing.
Herb Wertheim may be the greatest individual investor the world has never heard of, and he has the Fidelity statements to prove it. Leafing through printouts he has brought to a meeting, you can see hundreds of millions of
Born in Philadelphia at the end of the Great Depression, Wertheim is the son of Jewish immigrants who fled Nazi Germany. In 1945 his parents moved to Hollywood, Florida, and lived in an apartment above the family’s bakery. A dyslexic, Wertheim struggled in school and soon found himself skipping class.
“In those days, they just called you dumb,” he remembers. “I would sit in the corner sometimes with a dunce cap on.”
During his teens, in the 1950s, an abusive father prompted Wertheim to run away periodically. He spent much of his time hanging around with the local Seminole Indians, hunting and fishing in the Everglades and selling game, like frog legs, to locals. He also hitchhiked around Florida picking oranges and grapefruits.
Eventually, his parents had enough. At age 16 he stood in front of a judge facing truancy charges. Lucky for Wertheim, the judge took pity on him, offering him a choice between the U.S. Navy and state reformatory. Wertheim enlisted in 1956 and was stationed in San Diego. He was only 17.
“That’s where my life changed,” he says. “They give you tests all the time to see how smart you are, and out of 135 in our class, I think I was in the top—especially in the areas of mechanics and organization.”
With a newfound confidence, Wertheim
dollars in stocks like Apple and Microsoft, purchased decades ago during their IPOs. An $800 million-plus position in Heico, a $1.8 billion (revenue) airplaneparts manufacturer, dates to 1992. There are dozens of other holdings, ranging from GE and Google to BP and Bank of America. If there’s a common theme to Wertheim’s investing, it’s a preference for industry and technology companies and dividend payers. His financial success— and the fantastic life his portfolio has afforded his family—is a testament to the power of compounding as well as to the resilience of American innovation over the last half-century.
“My thing is,” Wertheim says as he reflects on his long career, “I wanted to be able to have free time. To me, having time is the most precious thing.” studied physics and chemistry in the Navy before working in naval aviation. This is about the time Wertheim began investing in stocks. It was the Cold War, the military-industrial complex was humming and American industry was on the move. The Dow Jones Industrial Average had finally recovered from the losses it suffered more than two decades before during the Crash of 1929, and aerospace stocks were leading the market.
Wertheim made his first investment at 18, using his Navy stipend to buy stock in Lear Jet, which at the time was known for making aviation products during WWII. Wertheim met its founder, Bill Lear, during a visit to a Sikorsky Aircraft factory in Connecticut, where the Navy’s S58 helicopters were manufactured. Wertheim was attracted to Lear’s inventions, like the first auto-pilot systems. (Later, the company would invent the 8-track tape and pioneer the business-jet market.)
“You take what you earn with the sweat of your brow, then you take a percentage of that and you invest it in other people’s labor,” Wertheim says of his near-religious devotion to tithing his wages into the stock market.
Once out of the Navy, Wertheim sold encyclopedias door-to-door before attending Brevard Community College and then the University of Florida, where he studied engineering but never graduated. In addition to taking classes, he worked for NASA—then in its first few years—in a division that improved instrumentation for manned flights. This fueled an interest in the eye and instruments optimized for vision.
In 1963 he received a scholarship to attend the Southern College of Optometry in Memphis and after graduation opened up a practice in South Florida. For 12 years he toiled away, seeing patients who were mostly working-class and who sometimes paid their bills with bushels of mangoes and avocados. Wertheim spent his evenings tinkering on inventions, and in 1969, he invented an eyeglass tint for plastic lenses that would filter out and absorb dangerous UV rays, helping to prevent cataracts.
The Vietnam War was under way, and plastics had become the material of choice for eyeglasses and sunglasses. Demand for Wertheim’s tint grew, and he sold it in a royalty deal for $22,000. But because of contractual breaches, the royalties never materialized.
So in 1970 Wertheim decided to get more serious about his inventions and set up a new company, Brain Power Inc. He founded it as a technology consulting firm, but Wertheim soon returned to his habit of researching and tinkering, developing tints, dyes and other technologies for eyewear.
A year later he concocted one of the world’s first neutralizers, a chemical that restored lenses back to their original clear state. This meant opticians no longer needed to carry large inventories of different-colored lenses or dispose of lenses that were improperly tinted. “I was still seeing patients, I had a little lab,” recalls Wertheim with a smile. He showed his wife a coffee can containing his chemical concoction and said, ‘Nicole, what’s in this can is going to make us millionaires.’ ”
It did. Between that chemical and the numerous other products Wertheim invented for lenses—some tints for aesthetics, others to help ease the symptoms of neurological disorders like epilepsy and still others to improve UV protection—BPI became one of the world’s largest manufacturers of optical tints, selling to companies like Bausch & Lomb, Zeiss and Polaroid. The company also began making lab equipment, cleaners and accessories for opticians, optometrists and ophthalmologists. Today BPI has more than 100 patents and copyrights in the area of optics, 49 employees and annual revenues of about $25 million.
In less than two decades, Wertheim had gone from ne’er-do-well to inventor and entrepreneur. BPI never achieved hypergrowth, but it provided a steady net income amounting to some $10 million a year, according to Wertheim, more than enough to feed his passion for investing and the good life.
“I didn’t want to have a big business,” he says. “But today, I have a 5 or a 6 or an 8 billion-dollar corporation, each of which I own 10% of.”
With BPI cash flowing into Wertheim’s brokerage account, he went to work buying stocks and honing a strategy that can best be described as a mix of Warren Buffett and Peter Lynch, with a touch of Jack Bogle, given that he dislikes fees and primarily uses two discounters, Fidelity and Schwab, to manage his massive portfolio.
With Lear Jet (later known as Lear Siegler) in the late 1950s, for example, Wertheim was practicing “invest in what you know,” the strategy popularized by the famous Fidelity Magellan fund manager Peter Lynch in his 1989 book One Up on Wall Street. Lynch told readers to use their specialized knowledge or experience to gain an edge in their investments.
Instead of concentrating on the metrics in financial statements, Wertheim is devoted to reading patents and spends two six-hour blocks each week poring over technical tomes. “What’s more important to me is, what is your intellectual capital to be able to grow?” Thanks to his engineering background, the technical nature of optometry and his experience as an inventor, the patent library is Wertheim’s comfort zone. Stocks he invested in based on their impressive patent portfolios include IBM, 3M and Intel.
Like Warren Buffett, Wertheim believes firmly in doubling down when his high-conviction picks go against him. He says that if you put your faith in a company’s intellectual property, it doesn’t matter too much if the market goes south for a bit—the product, he believes, has lasting value.
“If you like something at $13 a share,