One up on Wall Street
A few years back I read Peter Lynch’s classic One up on Wall Street, which is a great book for any beginning investor (as I was) to read. Lynch is arguably one of the top ten investors of all time and his success was largely based on his ability NOT to follow the crowd and looking for opportunities where others missed them.
One of the points that Peter mentions in the book is that often times the biggest winners pop up around us (in the shopping mall, grocery store, etc.) and the smaller investor stumbles upon them before Wall Street ever takes notice. If the smaller investor buys into the winning stock before the Wall Street investors do – they are going to benefit greatly from being in early. As he mentions, Wall Street generally has a herd mentality so once a stock is discovered by one Wall Street firm as a good buy, it is likely that many more big firms will be buying it as well. It is this process when all the “Big Money” is buying shares that causes the stock’s price to go up dramatically.
I am still trying to find a “ten-bagger” as Peter calls them (a stock that goes up 10x its value). I am disappointed to share that I missed one that was right under my nose.
Crocs – you know the attractively challenged, yet extremely comfortable shoes that seem to have grown famous at mall kiosks. Well, over the last few years I have watched them start popping up all over the place. I saw continued expansion in the company as they started offering a wider range of styles and products. But yet, it NEVER crossed my mind that I should look into investing in these guys. Well, since their IPO (Initial Public Offering – when the public can first buy shares of a company) their shares have gone up 6x what they started at.
The chart below shows the growth of the stock price since the IPO last year.
This is just about exactly what Peter Lynch was talking about. It was a company that I saw in action long before the wall street analysts took any notice. If I would have been more attentive, I could have made a nice chunk of change investing in Crocs. Well, one thing I am determined to do is to learn from my mistakes – I would suggest you do the same, I missed this one, learn from my mistake and catch the next one that comes by.
One of my favorite Warren Buffet quotes is, “there are no called strikes in the game of investing.” So, if you miss one or two or three, just get the next one. You do not LOSE any money by missing them. And if you wait and get the right one, you have a whole lot to gain.
Is it too late to invest in Crocs?
Well, as I was talking about, Wall Street is heavily invested in the stock (about 50%), so the chance for those big gains is past. Regardless, if it is a good company and a good price it still could be a good investment. I think I agree with Kiplinger’s that is a faddish company that probably will not be able to sustain the momentum that it has produced, therefore I will not be buying right now.
As you can see in the chart above, there was a major decline a few weeks back – which could create a buying opportunity, depending on what the reason was for it. I honestly have not thoroughly researched the stock, so I really don’t know many of the business details of it. If anyone has any insight about the stock, please share with us.
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