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GROWING RICH WITH GROWTH STOCKS<br />
lined, “What a Young Man Should Do With His Money.” It offered<br />
the following advice: “The young man should start by buying at least<br />
$20,000 of life insurance, half in convertible term and half in ordinary<br />
life. Twenty thousand dollars may sound like a lot, but it won’t provide<br />
much of an in<strong>com</strong>e.”<br />
Davis was a late bloomer when it came to Wall Street. He didn’t<br />
begin his investment career until he was in his late thirties, but his<br />
timing couldn’t have been more perfect. Within eight years of starting<br />
his brokerage firm, Davis’s net worth went from $100,000 to around<br />
$50 million. He got into the market at the low and rode one of the<br />
leading sectors all the way up.<br />
THE INSURANCE EXPERT<br />
In addition to managing his own personal fortune, Davis positioned<br />
himself as an expert in insurance stocks and promoted them to various<br />
financial institutions. The U.S. Steel Pension Fund, Putnam Funds,<br />
and Fidelity Funds were all clients. He became known as the dean of<br />
insurance stocks at a time when they were glamorous and underowned.<br />
At about this time, he was named president of the New York<br />
Society of Security Analysts. To add to his good fortune, Davis went<br />
to Japan in 1951, where he discovered that insurance stocks there<br />
were also undervalued. What’s more, they represented an incredibly<br />
attractive opportunity. Davis bought some Japanese insurance stocks,<br />
and saw many of his investments go up a thousandfold in a few short<br />
years.<br />
THE TREND COOLS<br />
Insurance stocks began to lose favor in the 1960s. By then, they<br />
were no longer undiscovered; in fact, most had be<strong>com</strong>e overpriced.<br />
Some life insurance <strong>com</strong>panies were selling for as much as 30 times<br />
estimated earnings. Like all high-multiple stocks that are unable to<br />
sustain this kind of giddy growth, the life insurance <strong>com</strong>panies got<br />
hammered and underwent a significant correction. That’s when people<br />
began to focus on property and casualty insurers. It became evident<br />
that all of those returning GIs were building or buying new homes,<br />
which meant they needed to purchase property and casualty insurance<br />
both for their dwellings and their cars. Once traders realized this,<br />
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