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URL:  https://boards.fool.com/hi-skierdena-your-article-and-sunshines-hi-24301707.aspx

Subject:  Re: AOL Article Date:  7/4/2006  12:24 AM
Author:  sdbsdb Number:  1307 of 7325

Hi SkierDena,

Your article (and Sunshine's --- Hi Sunshine) prompted me to post my own story. Perhaps you might learn something from it.

I came from humble circumstances, and of course, selected a career which I love, but which pays very little (can you spell "The Arts"). So I always knew I would be on my own as far as retirement, etc., were concerned. So, in my 20's, I started buying Sun Microsystems stock. I do have quite a bit of knowledge about computers, having intially started out in that field (I went to MIT for a while) but at that time was completely ignorant of the stock market, or anything having to do with finance. I had no idea what a P/E ratio was and I had heard about the idea of diversifying, but frankly, it didn't sit well with me then (and actually, it still doesn't).

However, I knew that Sun had a wonderful product, fantastic management and it was obvious to me that this was a winning combination. So I saved up money by skipping lunch, that sort of thing, and at the end of the month, would buy whatever shares of SUNW that I could. I did this every month for years and years. Sometimes brokers would call me, and tell me it was time to sell. When I spoke to them, it was obvious they were clueless about Sun's market, (they would compare them to outfits like Gateway and Dell, which are fine companys, I am sure, but were aiming at a completely different market). So I would just buy more.

This probably sounds strange, but I never even checked the stock price. I was having a lot of fun working at my career, and really didn't have the time or the interest to spend a lot of time following the market. Well, any time :-)

However, I always felt a little guilty about my lack of knowledge, and around 1999, someone gave me a copy of "A Random Walk Down Wall Street". So I read it. There was a lot in that book that I didn't agree with, but there was a very interesting story about one of the first financial bubbles, the Tulip Bulb Craze in Holland. The similarlities between this story and the dot com bubble were pretty obvious, but I wasn't that worried, because Sun (I thought) was still selling to Universities, Scientific Research outfits, Government offices, and the like. Months after that (we are now in early 2000), I opened my copy of the latest annual report, and the first thing I saw was that Sun was mostly selling to dot com's! The character of the company had completely changed. Well, I was horrified. I ran to the phone, and sold every share I had accumulated over 20+ years. Of course, the broker tried to talk me out of it, and wanted to sell me some Cisco, which I was never interested in. But I insisted. Long story made short, I think I missed the peak of the stock by a couple of weeks, which was fine with me.

I don't want to say how much I made, but I will say that it was enough that, with some care, I could have retired if I had wanted to, which is not so bad for someone who turned 40 that same year.

Since then, I have spent some time and learned quite a bit more. I bought some junk bonds with some of my Sun profits, and watched them a bit more carefully, but not much. I know that sounds awful, but I did very well with them, although I wouldn't be buying them right now. After that, I parked my money in short term treasuries. More recently, I have been buying stocks again, and while I still don't check the market much, and still don't diversify, I pay enough attention that I managed to acquire more of the companies I like during the recent market troubles.

If I had to do it all again, I probably wouldn't change much. I am sure I could have made even more money if I had paid more attention, but I was (and still am) having a ball living my life. I picked Sun because of their product, marketing and innovation, but also because it was small enough that I was sure it would have room to grow plenty. By contrast, IBM, which is a great company, it seemed to me, just didn't have the same potential for growth, since it was already so big. I do think that understanding the companies you invest in is the single most important thing in investing. If you have a clear and deep understanding of where you are putting your money, the chances are excellent that, given time, you will be very richly rewarded. That's partly why (with apologies to David) I am not that enthusiastic about diversifying. I didn't have the time to learn as much as I needed to know about other companies, and for me, ignorance equated to risk. The other reason people diversify is to minimize the volatility of their holdings. Well, I handle that by not looking at my holdings that often. I am sure they bounce up and down, but in this case, ignorance is bliss, I guess :-)

Sorry for the length of this... I don't post very often, preferring to read the many other more knowledgeable and wiser folks that populate Fooldom, so I guess I am making up for it here.

Hope that you find something of value in what I've written, and best of luck to you both.

Scott


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