Rule Breaker - Strategies
In Reply to New Rule, No Debate

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By dduct
June 14, 2002

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However, those who tend to stick with their stocks often enjoy sweet fruits, years hence.

I was sitting with my mother today. See is dying from cancer. We were talking about her success as an investor. "What? Me a successful investor?" We laughed. I asked her why she was a success.

"I always bought what I understood and stayed with the company as long as I agreed with what they said in their reports to shareholders." She sounds a lot like Peter Lynch.

She bought Disney in the mid-1960's when the investment advisors said that Walt Disney was never going to generate a lot of money. Mom never sold those 100 shares -- which have grown to 4800. She bought Upjohn in the late-1960's and sold it near its high in the 1980's. She bought Browning Ferris -- this time 100 shares at $10 grew to 2900 shares that were sold in the late-1990's.

During this period of time, she enjoyed her stocks. She knew what they were doing and what the impact would be from their success. My father, up until his death in 1992, and I used her Disney holdings to go to the annual meeting. We met all the Disney executives over the years and got a little more out of the stock than just ownership.

When you press Mom about her long-term buy-and-hold approach, she always mentions her brother. He has been a trader for years -- and successful. He always knows what's hot and what the brokers are saying. If she followed his advice over the years, she would have missed most major moves in Disney. When "it could get no higher" and the "boom is just about over" the success continued and the stock reflected that.

Anyone can look at the paper and note that Disney was a $40 stock and is now a $20 stock. That 50% loss is not missed on Mom. She wishes when she dies in the next few weeks that it would be worth more. Her advice? Until they look like they don't have a good long-term plan, stay with it. There is a shortage of good family entertainment.

My uncle will tell you that all of his trading, and he is well known as an excellent trader, does not equal my mother's success. It was always a surprise to him how well she did.

Her primary holding, other than Disney are:

Berkshire Hathaway -- she likes Warren Buffett's honesty and the fact that stock options are not a tool he uses to reward employees.

IDACorp -- she wanted a dividend and a safe utility. She bought the utility with the lowest power producing costs in the U.S.

The Mills Corp -- she saw a Mills mall in 2000, and the REIT's then 12% yield, and she was sold. This is a holding she will probably clear from her portfolio when it crosses $30 in the next few days. She is researching stocks now so she can "have a place to put the money when she sells."

ChevronTeaco -- Mom's father lost his entire investment in Altantic Richfield during the Depression. Because of that, she stayed away from oils through the early 1970's. Oil moved the economy so Mom did her research and bought Texaco. Good move!

Westco Financial -- Mom liked Charlie Munger. Again, like Buffett, he is honest. She also noted today that the four top executives are 70 and older. Mom is 82 and feels that too many times the wisdom of age is ignored.

I read a lot of criticism of David's long-term buy-and-hold approach. Yes, this could fail -- depending on what you purchased. Research done on heavy traders shows that most lose money -- and most of that loss is just trading fees. Having watched my mother successfully invest over the long-term, I know the thinking that has to go into it. You think differently if you are going to invest long-term. I think it is that "let's get this right the first time" approach that fuels her extremely successful strategy.

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