In 1996, a couple of marketing professors named Thomas Stanley and William Danko transformed some startling research on the habits of America's wealthy into a big bestseller called The Millionaire Next Door. They found that, unlike Donald Trump, most millionaires live with modesty and prize frugality and that, unlike Bill Gates, they made their money from boring businesses in quiet niches. In the book's appendix, the authors provide a list of popular millionaire occupations. Among them: owning ambulance services, cafeterias, funeral homes, mobile-home parks and meat-processing plants. The very rich head companies that control pests, distribute wholesale groceries, offer tug-boat services and manufacture curtains.

"Typically," write Stanley and Danko, "it's…mundane categories of businesses that provide wealth for their owners. Often dull-normal industries don't attract a great deal of competition, and demand for their offering is not usually subject to rapid downturns."

There's an important lesson here for investors in stocks. As a shareholder, you should always think of yourself as an owner, or a partner, in a business. "Focus on companies, not stocks," writes one of my favorite sages, H. Bradlee Perry of Babson Capital Management. The businesses that produce American millionaires deserve your attention. Dull, in other words, is good.

Of course, dullness is in the eye of the beholder. There's no definition, no Mundane 500 Index to track. My strong suspicion, however, is that, over the long run, stocks of companies in dull businesses have outperformed stocks of companies in sharp ones. . . .

. . . many wallflower stocks are priced inefficiently -- often too low. Such anomalies really do exist, even in a generally efficient market. As Warren Buffett wrote to his Berkshire Hathaway shareholders in 1988: "Observing correctly that the market was frequently efficient, [academics and Wall Street pros] went on to conclude incorrectly that it was always efficient. The difference between these propositions is night and day."

If the market were always efficient, Buffett wouldn't be worth $41 billion.

There’s a very important related lesson, however, one which Buffett also preaches heavily, by the way. If you read Stanley’s book you don’t just find wealth created from “mundane” industries. The group of people Stanley profiles also kept within their circle of competence in creating their wealth. They typically didn’t jump around from one industry to another.

In investing, there’s nothing wrong with sticking to what you know. Doing so improves the odds you’ll do well. That’s what we preach around here.