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Published: March 1, 2010
There are two ways to become exceedingly
wealthy in this world: invent a revolutionary technology or own
rights to someone else’s.
The greatest examples of this come from the world’s two
wealthiest men: Bill Gates and Warren Buffett.
These two have made their billions in very different ways. Gates
invented the means we’re using to write these words (Microsoft
Word)... His software has netted him over $50 billion to date.
Buffett simply bought the rights to future earnings in
everything from GEICO Insurance to Coca-Cola (NYSE: KO)
stock. He invested in these companies and their copyrights.
Today, we’re going to go one step farther…
While we are going to recommend you buy shares of a company, we
are really recommending you buy royalty rights to another’s
invention.
The history of royalty rights law is long and brutal. One of the
earliest cases of royalty disputes took place in A.D. 561
between St. Finnian of Moville and St. Columba of Iona.
At the famous Clonard Abbey in Cluain Eraird, Ireland, St.
Finnian lent his pupil Columba a psalter, or psalm book. Columba
copied the book and a dispute over who had rights to that copy
erupted, leading to the Battle of Cul Dreimhne, where more than
2,000 men were killed.
In recent history, a much less bloody royalty dispute broke out
between Paul McCartney and Michael Jackson over rights to many
Beatles’ songs. These rights are estimated to be worth as much
as $500 million.
Battles like this - in all likelihood - will continue to be
fought for centuries... the royalties due on pirated music being
the most hotly contested copyright dispute these days.
The never-ending fights over royalties make it clear just how
lucrative they can be.
The most profitable example that comes to mind is the song
“Happy Birthday to You.” Warner Music Group owns the rights to
this song and collects around $2 million just from royalties
every year.
Today, we have a less controversial - yet equally lucrative -
opportunity for you…
Mesabi Trust (NYSE: MSB) is a $244 million royalty trust
that holds interest in iron mines. Mesabi exists for one sole
purpose – to collect income on the trust’s 1.5 billion mineable
tons of iron ore reserves.
That has resulted in pretty sizable distributions to
shareholders. The trust currently yields 11.9% annually - an
amount that’s considerably higher than you would have netted in
the broad market over the last several years time.
Mesabi’s stable yield has resulted in significant price
appreciation in 2010. But that shouldn’t scare you away from
shares. Remember, I’m advocating buying this royalty trust for
the income it provides, and with an 11.9% yield right now, that
income more than justified current share prices.
-- Jim Nelson
Editor
Penny Sleuth
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