3 Ways Ty Cobb Can Make You A Better Long-Term Investor

Includes: KO
by: Tim McAleenan Jr.

Baseball legend and Detroit Tigers great Ty Cobb put together a heck of a career over his 20+ years on the field. From 1906 to 1928, Mr. Cobb had a batting average over .320 each and every year. Equally brilliant on the base paths, Ty Cobb stole home a major-league record 54 times, saying "the base paths belonged to me, the runner. I always went into a bag full speed, feet first. I had sharp spikes on my shoes. If the baseman stood where he had no business to be and got hurt, that was his fault." A fierce competitor, Ty Cobb was part of baseball's inaugural Hall of Fame class of 1939, having batted a career .367 with 3,902 career hits.

Although he may have been as fast as a rocket around the bases, Mr. Cobb was no rocket scientist, academically. Raised on a farm, Ty Cobb hardly ever attended school, and when he did, he would often neglect to do his homework assignments, taking pride in failing his tests. He considered his academic failures a form of "sticking it to those imbecile teachers" of his. Luckily, things started to look up for him in 1905 when he joined the Detroit Tigers organization, earning a $700 annual salary. Adjusted for inflation, Ty Cobb was earning a little under $20,000 annually in 2011 dollars. He hadn't quite arrived in the middle class yet.

And by the time he was in his early 20s, he knew that if he wanted to live the type of lifestyle he wished, he would have to start putting aside money to invest, no matter how meager the initial amount. Fortunately for Mr. Cobb, he led the Detroit Tigers to victory in the 1909 World Series, earning himself bonus money of over $1,000. While he watched his teammates spend their bonus money on moonshine, women, and new luxury equipment for their farms, a young Ty Cobb knew that if he wanted to have more financial security than his peers, he would have to act differently than them. As he looked at his World Series ring, Ty Cobb started thinking about precious metals, and concluded that copper was selling for a far cheaper price than it ought to be. He researched a copper mine in Arizona, and used his bonus money to buy 400 shares of the mine for $3 each. Ty Cobb watched those shares climb to over $1,000 a piece before deciding to sell. With a significant investment success under his belt to show him the real benefits of successful investing, Ty Cobb drastically altered his lifestyle, putting aside every spare penny he could find into various investments.

In 1924, he began doing newspaper advertisement for American automobile company General Motors (NYSE:GM). He took the $25,000 he received from the automaker, and plunged it into the company's stock, watching it grow into millions. He also incorporated a bit of artful speculation into his investments. Shortly after Serbian terrorists killed Austrian archduke Franz Ferdinand in 1914, Ty Cobb concluded that an eventual war was brewing in the United States, and that the demand for cotton would soar to meet the demands of a militarized America. Following his gut, Ty Cobb bought cotton futures on the New York Stock Exchange, and he was able to turn a $100,000 cotton investment into $150,000 in 2 and a half years.

But, of course, nothing changed Ty Cobb's life quite like when he had his first Coke. Cobb, known as The Georgia Peach, quickly fell in love with the Atlanta-based beverage maker, Coca-Cola (NYSE:KO), determining that it was indeed "the real thing." Cobb quickly called his broker and ordered 300 shares of the company, confident that the regional soda company would continue to grow. In his spare time, when he wasn't giving advice to young ball players on how to hit the opponent's pitch, Cobb was giving them investment advice, telling them to buy as much Coke stock as their salary would allow. And Cobb followed his own advice, pouring every additional penny he could scrounge up into Coca-Cola for over twenty years, bringing his total stake in the company to over 24,000 shares.

When he died in 1961, his estate was worth $12 million (about $70 million in 2011 dollars), and his investment in Coca-Cola allowed him to establish the Ty Cobb Educational Foundation so that children with backgrounds like his could receive scholarships to attend college. Had Ty Cobb's total investment in Coke been allowed to compound until today, the shares would be worth $2 billion. For comparison's sake, Ty Cobb's total ownership of the company would have been 1/10 the size of Warren Buffett's. Considering Buffett is the second-richest man in America and Coke is his largest investment holding, that's not too shabby.

Obviously, Ty Cobb had some advantages that you and I do not have. He could lend his name out to advertisers for quick money that he could pour into investments. Most of us aren't going to be hired to become TV spokesmen anytime soon. And Ty Cobb was incredibly fortunate to get in on the ground floor of Coca-Cola. That's probably one of the top 10 American companies you could have bought at that time. But you know what? There were plenty of other great men out there with decent salaries that did not make the millions in investing that Cobb did. Even if you can't hope to achieve the same returns as Cobb did, there's still a lot to learn about this guy's investing acumen:

1. In many ways, he was a man before his time in that he subscribed to Peter Lynch's crayon-test. The famed investment manager Lynch once said that for the best businesses, you ought to be able to illustrate how they make their money with a crayon. Cobb knew that Coke's syrup cost a third of a penny to make, and the drinks could be sold for five cents, so the stock seemed like a no-brainer to him. If Coke spent the latter part of the past eighty years saturating the United States, you might conclude that Coke's poised to saturate the rest of the world in the coming years. If you reach that conclusion, wait for Coke to come down to your price, and don't be afraid to make a sizable investment when you get in.

2. Cobb wasn't afraid to go against the grain and be a bit of a contrarian. In his early years, the ballplayers thought he was crazy for putting his money into investments. If you could buy nice clothes and farm tractors, why would you be a fool like Cobb and buy stocks? What fun is that? Cobb knew that he wasn't going to be playing forever, and that, to paraphrase Dave Ramsay, he would have to live like nobody else so that one day he could live like nobody else. His scrounging for every last dollar to invest served him well, and because of his discipline, he was able to die in the top .01% of Americans, wealth-wise.

3. He was truly a long-term investor. Knowing that World War II didn't spook Cobb, it's funny to look at what's rattling people these days. Really, Berkshire Hathaway (NYSE:BRK.A) fell 3% because of troubles in Greece? PepsiCo (NYSE:PEP) declined 4% because of lower volume shipments this quarter due to the economy? Cobb was undeterred by these things. Once he liked a company, and became convinced that their earnings would grow over time, he would pour his savings into those companies for decades on end, watching the money compound.

When looking back on his baseball career, Cobb said, "I had to fight all my life to survive. They were all against me, but I beat the bastards and left them in the ditch." Surely that sentiment could extend to his investment record as well. If we can find companies with sound finances, earnings growth, and a strong brand, and regularly commit to investing in those companies over the long haul, we ought to do quite well.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.