I'm doing fine putting my money where my mouth is. I'm a small investor like most of you and my profits have been building. I plan to keep putting as much money as I can into the system.
I started in August 1986 investing $1,000 each in Compaq Computers and Alaska Airlines, both on the New York Stock Exchange. In 1986 I hadn't discovered it was better to put 2/3 in stock and 1/3 in cash. In 86 I put 1/2 in stock and 1/2 in cash as Mr. Lichello suggested. Thus, I had $500 in stock and cash in both stocks. I also invested $1,000 in Sep. 1987 in Golden Nugget and $1,000 in December 1987 in Claire's Stores.
So have I done well? Is the system working? I'll let you judge for yourself.
The value of my Alaska Airlines portfolio was up 27.7% after the first year. I never had a buy order, only sell orders due to a couple of factors - first I picked a stock I liked that was at or near its 52-week low and the great Bull market helped keep prices going up. However as the October 1987 Crash showed and as I will tell you repeatedly: what goes up must come down, the law of stock gravity. Which is why the system is so good, it will take advantage of the chance to buy cheap stock.
My second winner was Compaq Computer that became a Superstock on the New York Stock Exchange, racking up the third highest gain of all NYSE stocks. I bought it at $ 12 a share and 13 months later it was selling for $ 75 a share before the big October crash. I would be kidding you if I told you that I knew Compaq would skyrocket. I knew it was a good stock and that's all I was looking for - one that would give me ups and downs but in a good company. For one year my Compaq portfolio was up 91%.
Now for Golden Nugget. I bought it because I like gambling and gambling stocks. Golden Nugget has a fabulous downtown hotel and casino and is very well managed. In addition, they are currently building a very large hotel/casino in a prime location next to Caesar's Palace (update - it's finished, called The Mirage, and fabulous!) That hotel will open sometime in 1990 and I felt the stock would zoom up. After my first few months of ownership, Golden Nugget was sucked into the Great Black Hole of the stock market crash. But that doesn't hurt and when you know the system as well as I do, you'll see why. The next year will give you extra good profits from the cheap shares you bought that are now much higher. As I retype this in May 1989, Golden Nugget has hit $22 a share. Remember we're taking the long view and we'll be the richer for it.
In summary Alaska Airlines is up 24% and Compaq up 107% from Aug. 86 to Oct. 87. For my other stocks, look at the spreadsheets and see for yourself. Now your profits are going to be lower because of commissions but that's life in the real world (see Chapter 16).
In the last five years I have made some good money and learned a lot. I always feel I can learn more, find better sources of information on stocks, and thus never feel complacent. As I learn more and better ways I will share them with you.
Update from 1993: I did make good money on Golden Nugget (now called Mirage Resorts). It eventually went up to $26 a share when I sold all my remaining shares. I also sold all my Claire's Stores when it hit $ 11 ( I originally bought at $3.50).
I did lose money on some stocks by taking a chance on two risky stocks for the hope of big profits - Lionel on the American Exchange, and Bank of New England on the New York. In both cases I was fully aware of the risk and went for the big payoff (for ex. Bank of New England sunk from $20 a share to $1 a share where I bought it). Thus while I lost money on these two that liquidated; I was playing the system correctly when I bought them, both were at their low and offered a great chance at tremendous profits if the companies turned around. I have never lost money on any stock I regard as conservative or semi-aggressive as I describe in this book. Now I know I can use "stop losses" on risky stocks to protect my capital.
In general I'm happy and making good money and prospects are even better because I'm getting better at picking stocks which I'll be sharing with you.