Back When I Invested Like a Boy

We're celebrating the winning ways of female investors with a series of articles about what makes the fairer sex better at picking stocks.

I'll admit it: A long time ago, I invested like a boy.

This was back when Internet stocks were hot, disruptive technologies were cool, and words like "profits" and "balance sheets" were wiped from excited investors' financial vocabularies. Back when this time, unlike all the other similar times, things were totally different!

Back when I invested like a boy, the "story" part of a story stock was the only part that mattered. Hot stock tips were all the rage. eBay, Plug Power, Pets.com, Kozmo.com, Amazon.com (Nasdaq: AMZN  ) -- these were all cool. In hindsight, of course, you know that not all of these companies survived, much less thrived.

Granted, Amazon evolved out of the dot-com bubble mess to become what I'd call one of the most incredible companies ever created. Amazon dominates online retail hands down, and its shares have resulted in a total return of nearly 11,000% since its 1997 IPO. However, for every Amazonian-type success, there were multitudes of losers after the bubble burst.

Back when I invested like a boy, I didn't worry about whether or not a company was profitable, or even close. Euphoric media buzz and crazy pie-in-the-sky dreams, er, business strategies mattered most to me. What an adrenaline high!

Back when I invested like a boy, Wall Street analysts' share price target predictions in the hundreds (and even thousands) of dollars didn't seem insane. They just seemed exciting!

Price-to-earnings ratios that were completely disconnected from anything close to realistic performance or reasonable growth expectations didn't figure into my decision-making process. Actually, price-to-earnings ratios, debt-to-capital ratios, and, well, any kind of ratio sounded kinda boring. (After all, it was different this time!)

Back when I invested like a boy, the so-called "smart people's" opinions about stocks seemed like a great way to decide exactly which ones to buy.

I'll admit it: Investing like a boy led me to own shares of TiVo (Nasdaq: TIVO  ) and XM Satellite Radio (long before it became Sirius XM (Nasdaq: SIRI  ) ). They were both so exciting and disruptive! These two stocks would change radio and television as we knew it! Of course, they did, but we all know that other competitive forces changed over the years, too, making the original investment theses for these stocks far less exciting.

And then there was (gulp) Enron. Remember the smartest guys in the room?

In short, my investing decisions had nearly everything to do with exciting stories, or stocks that "experts" talked to the skies.

Celebrate the feminine side of investing
I'm simply trying to say that back in those days, I did what a lot of male investors were doing. It all seemed so exciting, and not a bit difficult or complicated. Heck, as long as all stocks were skyrocketing, it felt great at the bubble's heights. Why worry about a company that's up to its ears in debt? So what if the company can't turn a profit, and may never turn a profit?

Like many investors, I took my share of lumps for these bad decisions. When the Internet bubble burst and I became just another layoff statistic, I sold my little stash of XM and TiVo shares for some extra cash. That was probably fortunate for me, since both companies sport negative stock price returns since 2000 or so. And I don't even need to explain what exactly happened to my couple of shares of Enron -- a painful and embarrassing experience.

These days, I try my best to seek out companies with a great outlook for long-term growth and profitability. I try to summon the will to be very, very, very patient, thinking in terms of years and years, instead of quarters. I try to foster the temperament to block out media buzz, noise, and short-term stock-price wackiness.

I love companies with stellar balance sheets, like Urban Outfitters (Nasdaq: URBN  ) , which has $310 million in cash and no debt. I adore companies with socially responsible missions, like Whole Foods Market (Nasdaq: WFM  ) and its philosophy of purpose-driven conscious capitalism. I ask myself a heck of a lot of annoying questions about risks and worst-case scenarios -- even of my favorite stocks -- and in my Fool.com articles, I often ask these of other investors as well.

In other words, now that I'm older and wiser, I invest like a girl. I have very little interest in egocentric Wall Street boys' club attitudes, the quarter-to-quarter mentality, or "what everybody thinks." And my goodness, do I never, ever want to hear, "This time it's different!" again.

My Foolish colleague LouAnn Lofton has penned a book about why mastering the art of investing may require a certain degree of feminine sensitivity. (I like to call it "investrogen.") In Warren Buffett Invests Like a Girl, LouAnn offers up plenty of research and examples to support her argument that many female investing traits lead to strong, Warren-Buffett style methods for success.

Just for starters, females tend to be more patient, conduct more research, invest in what they understand, and temper their own overconfidence. Anybody who's ever heard their mom say, "If everybody else jumped off a bridge, would you?" might start to realize why this all makes perfect sense.

These days, I no longer want to be just like one of the boys. I'm totally happy being a girl, and investing like one, too. Really, gentlemen, maybe you should think about embracing your inner female and learn to invest like a girl. Or at least in this case, stop and ask for some directions.

What you can learn from women who rule:

Want to learn more about how to invest like a girl? Warren Buffett Invests Like a Girl is available June 21, but you can get chapter one today for FREE.

The Motley Fool owns shares of Whole Foods. Motley Fool newsletter services have recommended buying shares of Amazon.com, Whole Foods, and eBay. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Urban Outfitters and Whole Foods, and hopes never to be called "Mr. Lomax" again (even though it's kind of funny). For more on this and other topics, check back at Fool.com, or follow her on Twitter: @AlyceLomax. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (13)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 10, 2011, at 4:32 PM, TripleEFocus1 wrote:

    So Alyce, if a girl invests like Warren Buffet, the gold standard of success, does that mean girls invest like men?

  • Report this Comment On June 10, 2011, at 6:37 PM, frannieruthk33 wrote:

    I really liked this article. I quess I am getting tired of reading about "shorts." I like the paragraph about that we conduct more research and invest in what we understand. Thanks for this article.

  • Report this Comment On June 12, 2011, at 7:21 PM, adamlogan313 wrote:

    As a new investor, I find it alienating that there are all these articles on the fool home page advertising so and so # of hot name brand stocks to buy. Is this just to fund the operation of the more earnest community/boards within?

    Anyways, I agree, but then again I hardly know anything. Just going by my guts and my guts tell me that jumping on any cool and groovy metro as necessarily a good strategy to get where I want to go. Trends traditionally go out of style.

  • Report this Comment On June 21, 2011, at 1:04 AM, jekoslosky wrote:

    Investing like a boy made me the owner of SIRI, too. Then, I watched it plummet down to 5 cents. Got out of that after it recovered vowing to be more conservative in my picks from then on.

    Even so, I still have a lot of boy investor in me. I'm reminded of this every so often when I look at my portfolio and think "Why did you invest in that (insert name of hot biotech/Chinese growth story/beer brewer here)?"

    stocksnovice.blogspot.com

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