Looking back on my history of stock buys is proving enlightening. In the first year, I bought five stocks, and had losses with two. Each of the losses was quite minor so I reckon I actually made some money in 1998. Well, except that 1998 isn’t done yet. Hah!

Four days before Christmas I bought three more stocks.

International Paper, Caterpillar and Athome. So let’s look at all three.

Excite@Home (ATHM)

ATHM is the old ticker symbol for AtHome Corp, which provided (what was then) hi-speed cable Internet access as a joint venture. Unfortunately, it merged with Excite in 1999 and the stock price soared to $128 in early 1999 to just $1 in late 2001 when it entered bankruptcy. It was a wild ride!

So how did I do, picking this piece of Internet dream? Purchased at $73.23, when it was all the buzz in early 1999, I finally sold out at $63.50 for a 13.3% loss of capital. Fortunately for me, I got out early before Excite@Home really crashed and burned. Still a 13.3% meant that for my investment, I lost $156.29! Boo-hoo!

I seemed to have realized that in March 2000, this one wasn’t coming back! Well spotted!

Caterpillar (CAT)

Now this was a more interesting buy, because CAT is still around these days!

In fact I went on to buy CAT twice and sell it twice, each time I pocketed some cash! Let’s take a look at the first attempt. I bought 25 shares at $42.44 and held htem for about 10 months before selling out at $56.38. The astonishing fact with CAT is if I’d held it through to today, it would have grown over 328% in that time, before tax and dividends NOT reinvested.

Even though ATHM would have gone to $0, the entire portfolio would still be up 87% in that time. That is not a great annualized return but it beats the 8% I actually got!

International Paper (IP)

International Paper’s performance was lacklustre throughout the entire, proving you can’t pick a great stock every time. But sometimes an average performance can look stellar compared to the loss of an entire stock.

I earned only 13.7% on this stock in the months that I owned it, but keeping for the entire period to today would have returned only 28.2% (before tax on dividends). Not even inflation beating, is it?

You can see the entire performance of these three stocks in the Summary Table published below.

[table id=6 /]

Watchful Waiting

There are three interesting observations: from looking at this portfolio and the first one.

Observation #1

Companies go out of business quite often, even big ones. In my first portfolio, GM is now an entirely new stock after its bankruptcy. ATHM is gone; and JPM suffered in the Great Banking Crisis.

Observation #2

A portfolio can balance the excesses of #1 by offering opportunities for outsize returns: Look at the performance of CAT, MMM, and MO. Together, these two portfolios would have doubled your money over those 16 years, even if you had done nothing!

Observation #3

Frequent trading can really impact your performance; but stop & start trading like I did really doesn’t help either. Burying your head in the sand doesn’t improve your returns!

Watchful waiting might be the best way to make money even now in the stock market, research slowly, buy slowly, watch slowly, and sell carefully!

That’s 1998 done, now! The scorecard didn’t do too badly, buy & hold would’ve done even better.

… Tech Stocks. And how it almost worked out!

With the recent updates on my first year, I managed to earn a paltry 20.4% return on my first four stock picks. Not bad. But then nothing to crow about … would you if you missed out on this return?

In this article, you will learn about:

my stock madness
5 lessons on purchasing stock

The Madness of DELL

But 1998 was the year I fell in love with DELL, and the madness spilled over into other tech stock. Though 1998 wasn’t the crazy year, and DELL was a very reasonable stock to buy in 1998, the following year began my decent into stock madness.

So DELL’s transactions

I bought DELL three times and sold it twice. There were no dividends at all, just buckets of excitement and despair as we rode it all the way to pre-split $70, then all the way down.

I bought an extra 22 shares and sold them in 1999 to cap about a 17% profit in 5 months on the secondary purchase. Fortunately, I did this because it helped to minimize the overall losses on owning DELL to just $44.95 + stock purchase/sale costs.

After I sold I sold the remaining shares in 2007 at my get out price of $24.98… the stock price just kept heading downwards until DELL was bought out by Michael DELL at $13.65. During my ownership period, DELL’s price traded all over the place. ALL over the place, from $10 or less to nearly $50 a piece (after 2:1 split).

DELL is still around today, but it is privately held. And we don’t really know how profitable DELL is now but that like many large behemoths they are pushing into digital security and computing services.

Though DELL damaged my portfolio, it was what followed that caused the most damage. Yes, 1998 isn’t done yet.

Lessons Learned: DELLightful

Though I wasn’t financially too much in the hole for stock. Perhaps, around $120 all told. I did take away some lessons.

1. Don’t fall in love with the stock

The gyrations made things heady on the Stock Boards as the longs came out and talked up the stock on each plunge as a new buying point, a chance to drop your entry point, or (even) ‘it’s sale time!’

You have to remain clear headed about why you got into the stock, what expectations for, what your entry/exit points are… and don’t worry about the noise. It’s just noise, and it’s as likely to be WRONG as it is right.

2. Low margins >>> Low profits >>> Shorter horizons

It doesn’t matter how much the stock is rising, the computer business had already morphed into a commodity business by the late 90’s, even before the Chinese companies started manufacturing PCs. The margins are VERY slim compared to Apple or MSFT or other companies.

3. If you’re #1, where can you go now?

IF you’re already no. 1, where else can you go? Even though DELL was already at the top of its game, and it wasn’t number 1, did you really expect it to go to the moon? I know I did. That’s the infatuation phase when you can see no wrong.

But put your head on and think for yourself. So it went up another 30%, how likely would it be to jump another 100% from the entry point? If it can’t, then why are you holding it? Perhaps it’s for dividends… but DELL didn’t pay any.

4. Choose your entry price

As I hinted earlier, you need to determine the value of the company to you, and decide on what offers you a margin of safety. If you purchase today, will there be sufficient safety for the price… or it will it drop through the paper bag?

For owning DELL, I could have chosen a more aggressive entry price, and there was a lot of opportunity for purchasing DELL at a lower even after 1999. The price collapsed to $6 before rising to the $20’s. Plenty of space to make 300% or 400% profit.

5. Choose your exit price

Hinted before, but choosing an exit price based on your valuation is the sensible course of action. In other words, at some point the stock price will increase beyond your original paramaters. Are the new prices and metrics in keeping with the valuations? Did the stock price break your exit price range?

If yes, perhaps there is an opportunity to buy more if the company’s in good shape. If there is uncertainty, you should look at selling because nothing much has changed except the price. You might be able to buy back in when it’s cheaper again.

@Home

And it’s those lessons that would have prevented me getting in on the final purchase for 1998: ATHM. Does anyone remember the frenzy of this stock? Well, I should really include it here because I did purchase it in 1998. It really belongs with my later purchases. Stay tuned…