How You Can Get Rich With 4 Dumb Mistakes

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I've written a lot of stupid things over the years.

It's true. I've been with The Motley Fool since 1995, and I'm closing in on a whopping 10,000 articles. As a limb-venturing analyst, I take big swings from time to time. I sometimes whiff badly.

Tastes like crow
Here are some of my more regrettable calls over the years:

• "Dell (Nasdaq: DELL) is still moving faster, leaving its rivals with little choice but to eat its dust," I wrote seven years ago. These days, it's those same dust-choking rivals -- Hewlett-Packard (NYSE: HPQ) and Apple (Nasdaq: AAPL) -- that are eating Dell's lunch.
• "What's left to say about the popular chain of high-volume restaurants?" I asked in singing Cheesecake Factory's (Nasdaq: CAKE) praises six years ago. "The company produces. Period. Trading at 30 times next year's earnings with enough expansion room to keep growing at a healthy clip, the stock's gains in 2004 should at least match the 25% projected earnings growth." There aren't too many eatery chains that have thrived in recent years. Chipotle Mexican Grill (NYSE: CMG) and Buffalo Wild Wings (Nasdaq: BWLD) have been rare standouts. Not Cheesecake Factory.
• "An improving economy may reward investors sooner rather than later," I wrote in singling out timeshare operator ILX Resorts as one of my favorite stocks under $10 in 2004. Healthy earnings and a 5.2% yield seemed steady, even as hospitality heavies Hilton and Disney (NYSE: DIS) were muscling in on the timeshare space.
• "Something special is happening at Six Flags," I wrote in March 2006, weeks after the amusement-park operator's stock hit double digits for the first time in more than three years. Special? The regional chain filed for bankruptcy reorganization this year.

All four of these stocks are trading markedly lower today.

Company	Rick's Call	Price	Now	Loss
Dell	Nov. 15, 2002	$29.82	$14.32	(52%)
Cheesecake Factory	Dec. 12, 2003	$28.53	$18.84	(34%)
ILX Resorts	Feb. 17, 2004	$7.50	$0.08	(99%)
Six Flags	March 9, 2006	$10.44	$0.11	(99%)

Source: Yahoo! Finance.

I can't run away from my mistakes. I went out on limbs, and the branches cracked.

Humble pie with a cherry on top
If this self-effacing excursion feels like a ridiculously circuitous route toward a back pat, you're right. I'm willing to own up to my blunders -- and relish them, actually -- because there's a secret to getting over the misses: the long ball.

Baseball purists know that Hank Aaron hit 755 homers in his illustrious 23-season career. Few will tell you that he also struck out 1,383 times. He failed more often than not in touching all the bases. Do fans care? No. In one powerful swing, Aaron could change the course of a ball game.

Investing is the same way. It's not about the misses. It's about the slugging percentages.

"Robotic arms in the operating room? Yep. It's really happening," I wrote in singling out Intuitive Surgical as one of four stocks that could double again in the summer of 2005.

"The biggest testimonial for the company's surgical-room breakthrough is that recurring revenues have gone from a third of the company's sales mix three years ago to half of total revenues today. This isn't just a more dependable source of income. It also means that hospitals, surgeons, and patients are turning to the robotic arms more often."

The stock closed at $49.73 that day. It had been recommended to Motley Fool Rule Breakers newsletter service subscribers at an even lower entry point earlier in the year.

The stock closed at $278.85 yesterday, as my opinion of surgical automatons growing in popularity has crystallized over the years.

A 461% return on the stock over the past four years is more than just a big number. In other words, even if Dell, Cheesecake Factory, ILX Resorts, and Six Flags went to zero, a similar investment made in Intuitive Surgical at the time would make the entire basket of stocks a profitable trade today.

If you're sharp enough to snag a five-bagger, it gives you the flexibility to strike out four other times.

Just keep swinging
This isn't lip service. I have publicly owned Netflix since October 2002, with a split-adjusted cost basis in the low single digits. It has been a 10-bagger for me. If I feared competition, I could have invested in the Hollywood Entertainment and Movie Gallery chains -- several times over -- and still be ahead.

In the end, our scorecard is smoking the market by an average of 18 percentage points per recommendation, because we're able to hit it out of the park from time to time. A fistful of winners can be more powerful than a bucketful of losers.

So bring on my next mistake. And the one after that. You don't have to get it right every time. All you have to do is make sure that when you're right, you're really right.

If you're curious and would like to see which promising stocks Rule Breakers analysts think could be the next Intuitive Surgical or Netflix, simply follow this link for 30 days of free access to our top stock recommendations.

This article was first published Aug. 29, 2009. It has been updated.

Longtime Fool contributor Rick Munarriz is off to the batting cages. He owns shares in Netflix and Cheesecake Factory. Intuitive Surgical and Chipotle are Rule Breakers recommendations. Netflix, Disney, and Apple are Stock Advisor picks. Dell and Disney are Motley Fool Inside Value selections. Buffalo Wild Wings is a Motley Fool Hidden Gems recommendation. The Fool has a disclosure policy.