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One of the smartest things you can ever do to make money is this: Pay the most attention to those who have actually gotten rich from investing, not those who made their stack by selling systems to the public.
That's how I went from being a high school dropout to a successful investor.
And that's how countless others have done it.
But here's the trick – you have to read a lot and study a lot.
To paraphrase a quote from Warren Buffett's partner, Charlie Munger, I do not know any successful people – high school dropout or not – who do not read a lot.
I have read countless books and millions of pages' worth of articles, academic papers, and research reports about investing.
I have read all the information on the usual suspects. I have read and studied folks like Warren Buffett, Peter Lynch, Seth Klarman, and Carl Icahn. That research has helped me develop my approach to investing.
I have also learned an awful lot from some of those behind-the-scenes billionaires who were not in the public eye all that much.
One of those backstage billionaires, in particular, really helped me go from the little league to the big time.
I call his approach the "Rainwater approach," and I'll share it with you here today…
He Went by "Rainwater," but Really, He Was Fire
His name was Richard Rainwater.
I never had the chance to meet Mr. Rainwater, but I have studied every deal he ever made and the ones his protégés made.
You might not be familiar with Richard Rainwater, but you undoubtedly know some of the people who learned and benefited from him.
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We all know who George Bush is, for example. When he owned the Texas Rangers, Rainwater helped him run the team.
Florida Governor Rick Scott worked with Rainwater and used what he learned to become a billionaire investing in hospitals.
Former Dallas Cowboys quarterback Roger Steinbach learned the real estate business from Rainwater and now has a very successful real estate company of his own.
Rainwater is best known for helping Texas oil millionaires, the Bass brothers, turn a family fortune of $50 million into several billion. One of his best moves while working for the Bass brothers was making a substantial investment in The Walt Disney Co. (NYSE: DIS) and hiring a guy named Michael Eisner to run the company. As we all know, that turned into a Disney Magic success story, making billions for the Bass brothers.
Striking out on his own, Rainwater bought real estate in the early 1990s when everyone else was selling. In the late 1990s, he bought up oil and gas companies while prices were in the teens, and he doubled down on Houston office buildings, making billions when prices recovered.
After the Internet crash, he bought telecom bonds for pennies on the dollar that eventually paid off at face value. He went where no one else would go and reaped big payday after big payday.
Richard Rainwater once said something I would have tattooed on my forehead, if only I was not terrified of needles. He said, "Most people invest and then sit around worrying what the next blowup will be. I do the opposite. I wait for the blowup, then invest."
Fortunes are made when prices are low and companies and assets are available at bargain prices, and reaped when the industry or asset class recovers.
Use Rainwater's Approach to Capitalize on Two Bargain Industries Right Now
About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of "Max Wealth" and Heatseekers.