In 1988, I was in Jr High and we had an elective class on Business. Our teacher tasked us with choosing a company to invest in and we would track its performance until the end of the school year, June of 1989. My best friend and I had just rented Wall street and were obsessed with the Wall Street journal and somehow we found Peter Lynch’s book: "One up on Wall Street”. We were hooked.
I somehow found a stock that I wanted to choose for our little challenge, but I wasn’t satisfied with pretend money so I used $100 from my morning paper route and asked my Mom to take me to the brokerage office to buy some stock. The broker was a nice enough lady, I mean how much commission can you make off of $100 investment but she set up the account, for the record it was a UGMA account because I wasn’t old enough to have my own individual account. I told her the stock symbol that I wanted and she did a quick reference check on the ticker and said “Oh, honey you don’t want to buy that stock, it’s too risky; you should buy this Chemical Company. It's steady, it pays a dividend and its safe”. I told her I picked this stock for my class project and I wanted to buy it but my mom said: “She’s the broker, let's listen to what she says”. I didn't say this at the time but really, I’m in 9th grade, I have the rest of my life ahead of me and even if I lose $100, is it going to bankrupt me??? OK, whatever. This was January 1989, guess what, the stock I wanted to buy was Blockbuster Video. Guess what else, it went up 700% by the end of June 1989. The chemical company, I still have the certificate of 3 shares to remind me to this day, I will never listen to another person’s investment advice again, and I will be the smartest investor in the room.
I willing admit, I had no idea why I picked it, but I feel so fortunate that I did because it is the basis of everything I have learned from that year up to and including today that makes me money in the market. You know why she said it was too risky? Its Sales and Revenue are growing too fast and it cannot sustain this growth. That may be true, however, what you will learn from this Blog and the courses I teach, is this is one of the key factors that almost all of the greatest stocks in history had in common.
Find companies that have new products or services, explosive Sales and Earnings and invest at the right time before they skyrocket like Blockbuster.
Welcome to the Nerdery,