Like most moviegoers, Dave Ong was pumped when he left the theater after an evening showing of Iron Man. But even though he was craving a sequel before the closing credits had finished, he was decidedly more enthusiastic for what it meant for the continued success of his investment in Marvel (NYSE:MVL), the company behind the movie, and his first 10-bagger.
Ong, a professor of biochemistry at the Vanderbilt University Medical Center, bought a couple hundred shares shortly after he read David Gardner's write-up in the July 2002 issue of Stock Advisor, then another 300 shares a month later, and 450 more the week after that. His total investment of about $3,500 recently hit $35,000 in value, and it's helped accelerate his retirement plans.
Why should you care about someone else's 10-bagger? Because Dave Ong holds no investing superpowers -- no accident with an X-ray machine that allows him to see into the minds of management, no near-death experience that transformed him into a caped crusader for capital allocation. No, he's just an ordinary retail investor who followed a good stock idea and exhibited some key behaviors -- patience, a willingness to stick with his winners (and even add to them), diversification, and a long-term commitment to keeping tabs on his stocks -- all the way to 900% gains.
"Some stock ideas just grab your attention -- I particularly like the ones that seem misvalued or those that have potential that people don't recognize," said Ong, who keeps notebooks of his thought process surrounding all his purchases and who holds stocks in different portfolios based on where he got the idea. "That recommendation was pretty compelling, and it just seemed to make sense."
As David Gardner wrote back then, "The biggest question here is just how sustainable all this success is. Is Spider-Man just a fad? Is the extension of Marvel's intellectual capital (its characters) into other media going to create some real capital? I think so, and I think … there are going to be a bunch of investors slapping their heads at having missed the obvious."
Commence slapping.
Paying to fail
During the tech bubble, Ong had most of his investments in mutual funds that all invested in the same tech stocks. After that bubble burst, he figured "I could pick stocks and lose money that fast on my own." After he "wandered in the wilderness" for a while, he started blending his knowledge with the recommendations of others and started finding some success.
He's quick to point out that he's hardly an expert when it comes to financial analysis -- "I've never looked at a balance sheet or done the financials; other people can do that a lot better than I ever could" -- but that certainly doesn't mean he just got lucky once. He's got a seven-bagger with Quality Systems (NASDAQ:QSII), another pick in his Stock Advisor portfolio, and he's reaped better than a 250% return on snack food maker Lance (NASDAQ:LNCE), which he read about in a "Stocks for Mother's Day" article in 2003.
With what amounted to "play money" when he started, Ong has found himself in the role of incredibly successful investor, padding his retirement savings in roughly five years of investing on his own. He's much like accidental superhero Tony Stark, except with stocks instead of a superpowered robot suit.
Finding your 10-baggers
Even though Ong's first batch of Marvel-ous investments are up 10 times in value, he recently added to his shares of the superhero factory.
"The hardest lesson I learned -- but the one that's probably proved most valuable to me -- is to keep adding to the good ones, even when they're way up. Just because it's doubled or tripled doesn't mean it's done."
To wit, he recently purchased shares of Intuitive Surgical (NASDAQ:ISRG), makers of market-changing robot-assisted surgical devices, a company whose shares have soared some 500% in the past three years.
After all, a whole lot of investors thought Apple (NASDAQ:AAPL) was richly valued in 2007 after annual gains of 201% in 2004, 123% in 2005, and 18% in 2006 … and then it climbed another 134% last year. (Our CAPS community -- by a 16,000-to-1,400 margin -- remains bullish.)
The other lesson is that a single 10-bagger has a way of making a lot of things better.
David's recommendation of Krispy Kreme (NYSE:KKD) in Stock Advisor -- a position he has since sold -- slid sharply downward, but the damage was merely a blip when blended with his Marvel picks. (In fact, David's side of the scorecard has earned 83% returns, compared with 19% for the S&P 500.)
Working in his own area of medical expertise, Ong saw that the epidemic of obesity would lead to an increase in Type II diabetes, so he invested in a company that offered an innovative way of monitoring glucose levels. That company went bankrupt.
"It made sense at the time, but it didn't exactly work out," said Ong. "But the thing is, I can make a whole lot of mistakes if I've got a 10-bagger in my portfolio."
And that's the marvel of the single great investment.
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Roger Friedman owns shares of Quality Systems and Intuitive Surgical. Marvel always looked expensive to him, so he never bought. (Roger is a slow learner.) Quality Systems, Apple, and Marvel are Stock Advisor recommendations. Intuitive Surgical is a Rule Breakers recommendation. The Fool has a disclosure policy.
