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April 9, 1999

Fools in Newsprint

My Dumbest/Smartest Investment

My Dumbest Investment

A few years ago my wife and I watched Debbie Reynolds promoting her new Las Vegas casino on TV. As she admired Debbie, my wife wanted to buy shares of the company in its initial public offering (IPO). We got some at $4 per share. The stock soon fell to $2. We bought more, thinking that we'd "average down," decreasing our average cost per share. We kept at it and eventually ended up with 6,000 shares, at an average cost of 62 cents each. Unfortunately, the stock was soon trading for 30 cents per share and the casino was filing for Chapter 11 bankruptcy. We now believe more in "averaging up." -- Bob Januska, Huntington Beach, Calif.

The Fool responds: Debbie Reynolds can play the Unsinkable Molly Brown on film, but apparently not in the business world. You learned a good lesson the hard way. With hundreds of great businesses in America to invest in, we see no reason to follow bad money with new money.

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My Dumbest Investment

In 1955, a broker called me. "Hello, Mr. Solis. How are you? This is Cal Filbert with Buttonwood & Co. I'm not trying to sell you anything. I just have a stock for you to watch. It's going places. Great Sweet Grass Oils has leased acreage next to one of Canada's most productive oil fields. It's trading at $2.25 per share. Keep your eye on it." A week later, he called to say, "Sweet Grass has moved to $2.50. Can you handle 5,000 shares?" I bought 1,000. Two weeks later, "It's at $3.00 and active. Another 1,000?" Sure. Six months later, "Filbert? He ain't here no more. Sweet Grass? 18 cents." I'm still getting three or four pitches a week. They all use the same approach. It's as if they were all reading from the same script. -- Lee Solis, Columbus, Ohio

The Fool responds: There really are scripts that budding brokers learn from. Once you recognize the patter, hang up.

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My Smartest Investment

On my son's birth date in June 1995, I started his college fund by buying $1,500 worth of McDonald's stock (39 shares). It's now worth more than $2,500 three years later (up 69 percent). It's not the biggest gainer I've ever had, but it's my smartest move, starting him with a portfolio now. Now when he orders a Happy Meal, he tells the counter help he's a shareholder. My second son was born a few weeks ago, so I figured: Pampers -- Procter & Gamble. I bought it at $67, again, $1,500 worth (22 shares). We will see. -- K.K., Houston

The Fool responds: Bravo, K.K. A great way to get little ones interested in and thinking about things financial is to turn them into stock owners early in life. They'll learn how money grows and will observe how their companies operate.

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My Smartest Investment

In the spring of 1997 I watched shares of Citrix plummet 60% in one day on rumors that Microsoft would not renew a business partnership with the software firm. After some research on the Internet, I determined that this partnership involved a market segment where Citrix earned 20% of its revenue. Since the news seemed to put at risk only 20% of Citrix's revenues, the market appeared to have overreacted. I bought the stock at $12 per share and a month later Microsoft renewed the partnership. The stock has since traded north of $80 per share. -- Mark Mikelat, Scottsdale, Ariz.

The Fool responds: Way to go! It's a great investing tactic to look for situations where investors have panicked and sold, essentially putting a sound company on sale. Many wonderful stocks have, on occasion, traded at attractive prices when the market overreacted. If you understand a company well, you'll be able to spot and take advantage of these opportunities.

Next: Name That Company Trivia

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