My sons love to hunt. The older one is a devoted outdoorsman. The younger one ... well, he's learning. Before a recent trip, the elder son had done his homework. He scouted the woods, noted some scrapes and other signs, and picked his spot. He put his younger brother in another prime spot. After a short time, the younger one left the place carefully chosen by his brother to go where he just "knew" the deer would be. The older one stayed where he was, letting 16 deer walk by as he quietly waited for the trophy. Knowing it was sure to come out of the woods if he just waited long enough, he eventually came home with a 13-point buck. The younger boy came home with nothing.
I've been catching up on my investment reading these past few days, particularly my latest issue of Inside Value, and I'm reminded there's a learning curve in all worthy endeavors. There are the precious few who appear to be great money managers from the day they step into the world. But for most of us, hunting down the great investment is a learned skill. It takes discipline to wait for what Warren Buffett called the fat pitch, something like Coca-Cola (NYSE:KO) after its major flubs.
But there is more to the story. My sons are allowed to hunt on some of the best land around, a happy consequence of one of the greatest investment experiences of my life -- not for what I earned, but for what I learned.
Biotech's go-go days
The company's name was OXiGENE (NASDAQ:OXGN). It was something of an ImClone Systems (NASDAQ:IMCL) of the day (minus the scandal), and I loved it. I was in an investing club in 1999 and 2000 and spent four months working on a presentation to give to the club about biotechnology. I researched OXGN so completely that I even got the name of the nurse administering an investigation of OXGN's big-deal cancer drug, Combretastatin A4P (CA4P). I called her and got what I thought was a super scoop on the test results. I read a multitude of papers on angiogenesis, the growth process of tumors, which CA4P attacks. The nurse told me about a miracle patient with thyroid cancer. I was convinced.
With my presentation, I persuaded my investing club to take a position in OXGN at about $12 a share. It went up to around $26 and then tanked. The club got out around $4 to $5. That makes a loss like the recent 70% haircut at Pharmos (NASDAQ:PARS) look like a real treat. By 2001, with the big bear in full swing, I couldn't believe I'd been stupid enough to invest in that company. I realized I'd been suckered by the general hype of the market. Everything had been going up back then. Remember the moves at Amazon.com (NASDAQ:AMZN) and Yahoo! (NASDAQ:YHOO)? I sold my blown-up OXGN and cursed the day I'd heard of it.
A call from beyond
In the summer of 2003, I got a frantic call from a guy named Charlie. He had been in the investing club with me and was one of the least sophisticated, dumbest buyers of stocks I'd ever met. Apparently, I had convinced him OXGN was seventh heaven. He had bought it privately, outside the club. When it tanked, he had bought more. Then, in the summer of 2002, when OXGN hit $1 a share, he had put his life savings into the stock. It is still hard for me to believe he did that. I had been completely unaware of his decision.
When he called, he had more than 50,000 shares of OXGN. And they had spiked to $15 a share. Genentech (NYSE:DNA) had announced its results with Advexin, a drug similar to CA4P, and Genentech stock shot up -- as did OXGN. "What should I do?" he asked. "What should you do about what?" I responded. Then he told me how much he had invested, based on ignorance and faith in my presentation. "How could you do that?" I asked him. He said my effort and presentation had totally convinced him, and he never lost faith in my judgment or in OXGN. I had sold out in disgust at $2, and my unsophisticated friend was now the proud owner of nearly $800,000 of OXGN.
Where my sons hunt
After more conversation, Charlie sold much of his holdings that afternoon. With the proceeds, he bought a nice farm on some of the best land around. He lets my sons hunt there. And as far as I know, he still holds about 20,000 shares of OXGN.
The point of this story seems to be some combination of homework, patience, waiting, believing in yourself ... and that it never hurts to have a little blind wild luck.
Happy holidays to my fellow pilgrims on the road to Wall Street, and good luck.
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