Shelby Cullom Davis: Dowager's Living Room Portfolio

"Davis's portfolio had the constancy of a dowager's living room. If a company he owned failed to meet his expectations, he disposed of it. If it merged with or was acquired by a larger company, he'd sometimes take his profit and invest elsewhere. But these were exceptional cases. Mostly, he bought and held. Year after year, he stuck with the same names."

"While the Dow went south (down 24 percent from 1947 to 1949), Davis's portfolio went north. He was in the right stocks and the right industry, and his rapid moneymaking got a considerable boost from leverage. He borrowed $29,000 the first year and continued to borrow to the maximum throughout his career."

"Meanwhile, Davis's early stock picks were merrily compounding. He'd started his fledgling company with $100,000 in assets ($50,000 cash plus the seat on the NYSE, valued at $50,000). By the end of year one, his net worth was pegged at $234,790."

"Investors who had no idea of the private worth of their holdings were susceptible to being scared out of them. Their only measure of value was the stock price, so the more the price dropped, the more they were inclined to sell. Davis was panic-proof. Wall Street's daily, weekly, monthly, and yearly ups and downs didn't alter his strategy. He held on to shares through demoralizing declines, knowing that the market…"