Monday, June 30, 1997
The Mishap in TMF
Mishap
by Neil
Campbell
My palms were sweating ... my heart was racing ... I had a chunk of cash in my savings account and I was itching to make my first move into stocks. Being young and aggressive, with a long horizon for compounding to take hold of my precious principal, I was ready to take the plunge. But what would be my first investment? I knew nothing about ratios, dividends, and investment gobbledygook. Research was out of the question; I wanted a stock placed on my front doorstep wrapped in gold. But where would I find my first precious baby?
I called my friend at Montgomery Securities. "Hey, you wouldn't happen to know about a HOT investment tip, now would you?"
"Check out XYZ. It's one of the hottest biotech stocks out there. It's pretty volatile so it'll take you for quite a ride." That wasn't the answer I was looking for.
I thought to myself, why don't I take some advice from Peter Lynch? Invest in a company that I know personally. I looked around my house and saw nothing but brand names -- Nike, Timberland, Sony, Coca-Cola, and Playboy, umh, I mean Time Warner. What about these companies? Nah, I wanted a company that was unique, a company that I could somehow embrace as my own. The stock ticker would read, "Neil Campbell's company up 200%, surpassing the S&P 500 by a whopping 180%!"
Hey, why don't I go online and check out my favorite investment site, the Motley Fool? Browsing through the Fool, I saw a buy report. "Fool buys 600 shares of ATCT for 22 7/8." Wow! This must be my lucky day; the Fool just got in on a stock ... today! This was just what I was looking for, a stock selected by proven winners. The next morning, I went down to Schwab and purchased a small load of ATCT at $25 1/8 without even thinking about it. I walked away from Schwab confident in MY ability to pick stocks.
Well, all of us in Fooldom know what happened. The bottom dropped out of ATCT in a few weeks after the company failed to meet earnings estimates. And the bottom kept dropping. Where had I gone wrong? What did I do to deserve this?
Looking back on my purchase of ATCT, my mindset was wrong from the very beginning. Ironically, even though ATCT sat in the Fool Portfolio, I realized that MY purchase of ATCT was most UNFoolish. I knew nothing about ATCT and really didn't want to know. I saw ATCT as a ticker symbol and not a company made of people, technology, and customer service. Furthermore, I threw all my eggs into one basket. Why didn't I diversify? The ATCTs certainly don't look as bad sitting next to the America Onlines of a portfolio. I had to learn the lesson through a costly mistake, but how else can I expect to succeed in the market? I'll be much more prepared for my next plunge into stocks.
As you can see by my e-mail address above, I am now an employee of the company that introduced me to my dumbest investment, ATCT. I bet you can't you guess how I got the name Mishap, can you?