From Tom Dyson, publisher, the Palm Beach Research Group: Yesterday, I used a tree to illustrate the power of compounding. Here’s another example that illustrates a different point…

You’re looking at a cross section of a red spruce. It survived a forest fire. (You can see a fire scar on the right of the picture.)

Despite what you might think, fires actually make forests healthier.

Fires consume the weaker trees and the undergrowth. The stronger, more stable trees that survive have less competition for water, more nutrients, and greater room to grow.

The result? They thrive.

Look at the width of the rings closest to the fire scar. See how narrow they are? Now notice how their width explodes from that point forward. You’re seeing evidence of the tree having a massive growth spurt following the fire.

Our Legacy Portfolio companies are like the strongest trees in the forest…

They benefit from the wildfires of the stock market—bear markets and crashes.

That’s because bear markets clear out the competition, reduce regulation, and stimulate demand.

Now, I’m not saying Legacy stocks are immune to market corrections. Many will drop in price along with the market… they’ll receive their “burn marks.”

But after the bear market retreats, they’ll grow faster, stronger, and higher than before… just like the tree in the picture.

That’s why we hold on to Legacy stocks when fires burn through the market. In fact, we’ll buy as many additional shares as we can at amazing discounted prices.

Remember, the goal of the Legacy Portfolio is to collect as many shares of these great companies as possible. In the long term, the Legacy strategy is the most powerful wealth-generating force in finance.

In 1988, Warren Buffett wrote the following in his letter to Berkshire Hathaway shareholders:

When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.

We’re on board with Buffett. Our Legacy companies are outstanding businesses. They have outstanding management. And we plan to hold these companies forever.