One of the lesser-known investors on GuruFocus.com is John Pappajohn, a Greek immigrant who met Warren Buffett (Trades, Portfolio) in 1969 and has earned 40% annual returns ever since. A self-made multi-hundred millionaire, Pappajohn is an active investor with a portfolio that should fascinate any investor looking to beat the market long term.
Pappajohn was raised in Iowa, neighboring Nebraska and "The Oracle of Omaha." He graduated from college in 1952. By 1969, he had saved just enough money to become a venture capitalist: $100,000.
As he vacillated between being a full-time VC or taking a more hands-on position inside one business, he called Buffett. Buffett advised him against being a full-time VC: "He told me he was getting out of the business and going into operating a company. And you know what? He was right."
So Pappajohn decided to take an operational role within Kay Laboratories, where he invested both his money and time. Baxter eventually acquired Kay Laboratories, earning Pappajohn his first million. He then made a fortune in Caremark (of "CVS/Caremark" fame), approximately $25 million in Quantum Health Resources, and by 1997 had a net worth exceeding $200 million.
During his career, Pappajohn has launched over 100 companies and been involved in 50 IPOs. He explains his success in equal parts hard work and networking. James Altucher says Pappajohn works "15-hour days" while focusing his energy on connecting people.
Pappajohn described his typical week to Altucher: "I'm interviewing a CFO for one company ... meeting a bank about taking another company public ... meeting with some IP lawyers about a tech company ... reviewing the ongoing trial of another company ... It's all good, James."
A big Rolodex helped Pappajohn get into deals like American Physician Partners, where Pappajohn's investment multiplied 120-fold within 18 months. "His investment acumen is the stuff of legend," commented a Forbes reporter on this investment.
IZEA Inc (OTCMKTS: IZEA)
One of Pappajohn's more recent investments is IZEA (IZEA, Financial), in which he currently owns a 7% stake. Due to IZEA's debt-free position, Pappajohn likely sees IZEA having several times the upside opportunity versus its downside. Specifically, IZEA has a market cap of $23 million that is backed by $5 million in cash; physical, digital and intellectual property; no debt; and $23 million in projected 2015 revenue.
Three analysts maintain Buy ratings on IZEA with share price targets ranging 50-150% higher than today's price. (IZEA has no Neutral nor Sell ratings.) Due to a significant salesforce expansions and a recent acquisition that closed in February, IZEA's CEO estimates that the company's revenue this year will be 176% higher than last year.
Cancer Genetics (NASDAQ: CGIX)
Another one of Pappajohn's investments is Cancer Genetics (CGIX, Financial), which opened for trading on the NASDAQ in August 2013. Pappajohn recruited its CEO and invested $12 million to bring the company to the NASDAQ. The company was valued at roughly $40 million on its first day of trading on the NASDAQ –Â a healthy return in under one year for Pappajohn –Â and it soon expanded its market capitalization through secondary share offerings as well.
About 1.5 years have passed since that day. As of Pappajohn's most recent regulatory filing, he seems to have taken some of his profits off the table, although he still owns $12 million worth of equity and remains a non-executive chairman.
Generosity
Pappajohn certainly gives back from his success. With philanthropy exceeding $100 million to date, he is one of Iowa's largest benefactors. He has founded centers bearing his name at five colleges to support entrepreneurship education. He also backs startup companies as an angel investor, with a focus on biotechnology and artificial intelligence.
When Pappajohn received the prestigious Horatio Alger Award, the association summarized his generosity, "Mr. Pappajohn regards business and investment not as primarily an exchange of goods and services, but as a process of human contact and interchange, where the more you give of yourself, your knowledge, your attention and your enthusiasm, the more you and those you support receive personally and financially."
