Chewy’s Founder Sold His Company For $ 3.35 Billion Then Bet All Of His Payout On Only Two Stocks Tyler Durden Tue, 06/09/2020 – 04:15
Chewy.com founder Ryan Cohen decided back in 2017 he was ready to sell his business, cash out and move on. The $ 3.35 billion sale of his business that followed instantly made Cohen extremely wealthy.
Then Cohen did what almost everybody in his position wouldn’t do. He turned around and invested nearly all of his proceeds from the sale into Apple and Wells Fargo stock. And nothing else.
He told Bloomberg: “It’s too hard to find, at least for me, what I consider great ideas. When I find things I have a lot of conviction in, I go all-in.”
Cohen says he owns no real estate aside from his main home, which he has lived in since 2013, no holdings in hedge funds, PE or VC funds. He has no bonds and has never done a PIPE deal. He has been driving the same car for years.
“I try to keep my life as simple as possible, so I’m not really a family office person,” he said. It’s possibly the worst thing an investment bank, looking to capitalize on rich Silicon Valley founders, could hear. In addition to trying to sell wet-behind-the-ears wealthy Silicon Valley titans complex products, at the very least a financial adviser would have recommended diversifying.
Like William Bernstein, a principal at Efficient Frontier Advisors, who said: “It’s down to underlying facts. There’s almost no evidence of skill in security selection.” 70% of the companies that make up the S&P 500 Index will underperform the average, he says. “Luck is not a cure for confidence. It exacerbates it.”
Cohen’s average cost basis in Wells Fargo is $ 46 and the stock trades at about $ 32 today, beaten down as a result of scandals at the bank and the plunge in markets due to the pandemic. At the same time, however, his shares of Apple are up 120%.
Given the two stocks’ performance and, depending on the weighting of each in his portfolio, his account value likely hasn’t moved too much since he began investing.
An S&P index fund is up about 25% over the same period.
Cohen says his father taught him about having the courage of his convictions. “He taught me how to block the noise from the masses. To have a point of view and have conviction and not waver,” he said. His father, who passed away last December, advised him while he was building his business and taught him the basics of equity valuation.
“You need to have the temperament to block the noise. Sometimes it feels like a roller coaster,” Cohen concluded.