I began writing this post with the intention of expanding on my experience at the June 2019 annual LD Microcap event. If you are reading this as a GeoInvesting Premium member, you know that we have been providing you with cliff notes from 1 x 1 interviews I conducted with management teams that attended the event. I wanted to talk more about some of the fun things I did after the event, like hanging out in Huntington Beach, CA with Gerald Caterina, one of GeoInvesting’s longest tenured Premium Members – specifically, on how the time I spent in Huntington Beach took me back to a microcap consumer electronic stock I sold years ago (that I wish I had kept). Peter Lynch would love this one. It will serve as a great a case study to debunk the myth that all microcaps are junk…
…but I’m going to revisit my LD trip a little later, because today I wanted to give you a bit more information on the main factor that catalyzed my mission to become a full-time investor.
Giving Dad Some Props
A few years ago, I touched upon the influence my father had on my pursuit to become a full-time investor. However, now that Father’s Day just passed, I thought it would be a good time for me to give my dad some more props for this role he played. By the way, if you are a dad, I hope you had a wonderful Father’s Day last weekend.
My dad is one month from turning 80 and is not in the healthiest of conditions. He underwent a double bypass surgery in 1986, which is generally expected to last 10 to 20 years before another bypass is needed. He then had a heart-valve replacement surgery in 2012, which (in his case) was estimated to have about a 5-year limit. Well, it’s been 33 years from his bypass surgery and 7 years from his valve surgery and both procedures are still doing what they are supposed to accomplish. So, it’s fair to say that my dad has defied the odds outlined by the stats by following a disciplined healthy lifestyle regime of diet and exercise.
Now, I am just one year away from hitting 50, which for some reason has led me down a journey to reflect on the very significant role my dad played on my full-time investing career that began while I was in college (1988 – 1992), helping to shape the way I have applied investment disciplines for nearly 3 decades. In Malcolm Gladwell’s book, “Outliers: The Story Of Success”, Gladwell talks about the sparks that set the foundation for successful entrepreneurs like Bill Gates of Microsoft Corporation (NASDAQ:MSFT).
One of the key conclusions Gladwell makes is that, although it takes 10,000 hours (of hard work) to master a subject, your environment (luck) also plays an important role, in that the earlier you are exposed to this subject or passion, the better chance you’ll have of getting your 10,000 hours in. For example, before college, Bill Gates was “lucky” enough to have been able to attend a private school that provided the tools to allow him to start programming before most colleges had computer labs. Tom Johnson summarizes the path to success outlined in the book:
Even though I had watched my dad pick stocks while I was in high school, my pivotal moment arrived early in college, when at 19, when my dad handed me a book to read one night, “One Up on Wall Street“, by Peter Lynch.
A few days later, I departed for a road trip with my best friend, Renn. We would be driving hours from the suburbs of Philadelphia to Mobile Alabama to visit his ailing Grandfather (Pappy). Memorial Day weekend was around the corner.
The trip was very memorable. It was great spending time with Renn. You may not know this, but Alabama sports miles of beach real estate along the Gulf Coast called the Gulf Shores. Walking along the beach on a stormy day, I saw tiny swirls of water just before the shoreline that looked like mini tornados getting ready to rise above the surface of the water.
After spending some time with my friend’s Grandparents, we decided to continue our travels west, to Pensacola Florida, where luckily, the weather was tame. I stepped off the white sand and waded into the clear blue water on the beach. I was amazed at how calm the water was and how deep I could travel into the water with my knees barely wet.
The smart planners we were, we didn’t realize it would be impossible to find a vacant hotel room during Memorial Day weekend. So, we ended up spending a couple nights sleeping on the beach, drinking whiskey from the bottle and making a few friends. I remember waking up one morning to a pelican or some type of large bird staring right at me, probably wondering if it should eat me or just laugh at me.
But what ended up being a most defining part of the vacation was constantly thinking of the Peter Lynch book. I read it before the trip, but had forgotten to bring it along with me. I spent a good amount of time thinking about that book and couldn’t wait to get back to the Philadelphia burbs to start investing on paper and figuring out how I was going to pursue a full-time investing career with just $3,000.
Shortly after college was back in session when the summer break ended, I ended up buying my first stock in a company that sold disk drive storage solutions that had recently exited chapter 11 bankruptcy. I locked in great returns fairly quickly. The funny thing is that this stock was the same one I bought in a high school mock competition game that ended badly for me with the stock going to zero. I didn’t do the research to find out that the company had recently entered chapter 11 bankruptcy. It was nice to get my revenge with real money on the line. I used the winnings to buy a ski jacket that I still have today as a sacred memento.
I remember shortly after I graduated from college, my dad came home one day to see me setting up a new computer on the dining room table, asking me what I was doing. I said, “well I’m thinking about becoming a full-time investor in the stock market.” He was extremely unhappy.
A Look Back at My Dad’s Work Ethic & Career Path
My dad was all about hard work that could be measured by hours and grit. He arrived in Detroit from Lebanon in 1967, two years before my mom joined him. After he arrived in the USA, he worked tireless hours for one of his five brothers, helping him run his “party” store, eventually opening his own restaurant. When my Mom arrived in America, she spent most of her time working with him. It was work, work, work – not sitting behind a computer watching a stock market tickertape.
My father eventually left the bakery business to become a top pharmaceutical sales rep, moving the family to the suburbs of Philadelphia where he worked for Lemon Pharmaceutical, which was later acquired by Teva Pharmaceutical Industries (NYSE:TEVA). He eventually left the pharmaceutical gig to buy a company, Atlantic Coast Spas, with a fellow entrepreneur. The company manufactured high-end bathtubs (Jacuzzi style) and outdoor water gardens serving customers like Hovnanian Enterprises, Inc. (NYSE:HOV), Toll Brothers, Inc. (NYSE:TOL), Pultegroup, Inc. (NYSE:PHM), Lennar Corporation (NYSE:LEN). He retired in 2004.
Now You Understand…
Needless to say, my dad was not at all happy with my career path I was about to take. “You spent all those years in college for this?”
So, to spare my dad all the pain, I found a part-time evening job at Vanguard for one and half years, giving me time to pad my bank account while I traded stocks during the day out of an office with a college buddy who had recently left Merrill Lynch.
Luckily, my dad ended up supporting my career 110%. Had it not been for the defining moment of my dad introducing me to Peter Lynch, I’m not quite sure if I would have become a full-time investor, played a role in outing fraud or even been actively involved in the stock market. I was hooked from the moment I read the first page of “One Up on Wall Street”. So, I can attest that Gladwell’s hierarchy was probably relevant for me.
I guess the reason I’m writing this letter to you is to remind you to think about some of the defining positive moments in your life. It might change your perspective on life for a day or two, or possibly convince you to retool aspects of your life, allowing you to gravitate to an environment that will be conducive to your success.
I’ll be talking to you next week, getting back to some more of my take-aways from LD Microcap Conference.
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