Thanks guys...BBAL + 25%.... [Archive] - Two Plus Two Older Archives

squiffy

12-19-2003, 01:44 PM

Again. It is not necessarily a BAD move. Just very risky. It will go up and down and up and down on speculation and rumor. Next time it may go down 50%. The only problem is, if you make 1000 investment purchases over a lifetime and all are like BBAL, you could MAKE a TON of money. Or you could LOSE a TON of money. And you really cannot begin to quantify with any degree of certainty. How well you will do.

My college roommate bought something called Duane Reed a week or two ago. Yesterday it went up 10%. I didn't buy because I am 100% invested in ODP (which is bad because of lack of diversity, but do what I say, not what I do). Duane Reed is some kind of pharmacy chain. Even if I had money I would not have invested in them as I know nothing about them. They are probably some kind of NYC or east coast chain.

Anyway, 10% in one day is incredible. And 25% is incredible.

If you want to do BBAL with some of your money. Hey, it's your money. And it did go up. But it is just a question of investing style. BBAL is closer to gambling. Do you really want to gamble with 10% of your entire bankroll?

And fine it's up 25% now on paper. Did you sell and pocket the gain? What if it drops again. You won the battle. But is the war over yet.

Until you sell, your profits are paper profits and you have to pray that there is no sudden drop on bad news.

Again, just my personal preference based on reading about Warren Buffett and value investing.

I prefer to invest in a solid well known stock that is "temporarily" down, and to have a really good shot at a modest 5% to 10% gain over 6 months to a year. Now often you can get lucky and get that gain in 1 day, 1 week, or 1 month. Terrific.

Some people want to pick the next Starbucks, Dunkin Donuts, or BBY. But I just think that is a long shot. And I have no confidence that I have the talent or wisdom to forsee the future in that respect.

I cannot tell you if BBAL will succeed and fulfill its promises, or whether its going to go bankrupt in one year.

But I am pretty sure that Coke, Pepsi, Gillette, Office Depot, Home Depot, Staples, McDonalds, etc. will be around in 1 year or 5 years and making decent money.

So if MCD is at a 5 year low, as it was about 6-months to a year ago. I saw that as a good investment.

Not because it offered the highest return. But it offered a damn good return, with a very low risk of complete bankruptcy.

I'd rather have only a 5% to 10% return, with almost zero risk of bankruptcy, instead of an unknown chance of a 2000% return with an unknown chance of losing 100% of my investment.

But that's just me. If you want to take 10% of your money and put it on a company that MIGHT hit a home run. Then that's your choice.

Me. I have busted my ass for about 8 years and hate working as a lawyer. I also was a middle school teacher for 5 years.

On paper, I have $200,000 in my Ameritrade account that I built up through index investing and saving. I made money in the 90's boom just being in the S&P 500 Index. Then lost about 50-70K during 911 because I invested in BBAL type stocks. Then made it back this year and am back to even.

I am going to stick with proven stocks.

With ODP, on paper, I made about 5 or 6% over 3-4 months and built up a paper profit of about $11 K. That's not a killing. But if I can keep hitting singles I can win the game.

It's nice to hit a home run, but if I close my eyes and swing for the fences, I increase my risk of striking out.

My theory is, bet on Michael Jordan when he has a sprained ankle. So many of the institutional and large mutual fund investors are short-term thinkers. If a well-established company is having short term trouble or a short-term downturn in earnings, big investors tend to OVERSELL. They have too much pressure on them to post short term profits every quarter.

As a small investor, you have a huge advantage because you can think in the medium to longer term and invest in a stock that may not recover for 6 months to a year, but when it does recover you can easily make 5-30%. You generally won't make 1000% or 10,000%. BUt you are very very very very likely to make a solid return and NOT LOSE IT ALL.