Can you spot a winner? I can. Maybe not every time, but more often than not. I call it my special purpose.
But can it make you rich?
Sure. Imagine you paid that guy Hiro from Heroes to bend time and space for you. You could whisk back to July 1995 and buy Dell. Take along $1,000, and you've got $39,000 in 10 years.
While you're there, grab some Cisco Systems -- which morphs $1,000 into $6,000.
You're probably wondering: If you could bend time and space, would you really invest only $1,000? Well, that's what you should be wondering. What you're really wondering is whether I'm simply pulling winners out of my hat. Well, I'm not. I'll even show you a table to prove it.
That's right, I said a
table
In fact, I heard about the winners you just saw (and others you're about to see) one sunny day in 1995. And every one of those stories made perfect sense to me at the time. Remember, we're not talking 1989 here.
With the exception of AOL, every business we'll discuss today was proven by 1995. They were all industry leaders ... they were run by entrepreneurial zealots ... they essentially printed cash ... and insiders loved the stock.
Best of all, they were only modestly huge at the time, which made them attractive to institutions, yet left them room to run. Only one thing could have made them better, as you'll soon see. But first, it's time I revealed my source and showed you that table.
I won't keep you hanging
A fellow named Tom Gardner turned me on to those stocks in 1995, plus the others in the table below. Tom's a founder of The Motley Fool. He's also bald and tells decent stories. In 1995, he got it into his bald head to build a portfolio we could hold for 10 years.
Here's how we fared ...
|
Company |
7/7/95 |
7/5/05 |
Return |
|---|---|---|---|
|
Sun Micro |
$1.59 |
$3.64 |
129% |
|
Intel |
$8.04 |
$25.98 |
223% |
|
Microsoft |
$5.16 |
$24.48 |
374% |
|
Hewlett-Packard |
$13.62 |
$23.36 |
72% |
All together, there were 10 stocks in all. After 10 years, we were up 667% (versus 147% for the S&P 500) -- turning $10,000 into some $77,000.
But you could have done better
Of course, if you want to do better, you have to go further back in time -- when these companies were smaller. If you'd bought Dell in 1991, for instance, you'd have ended up with four times as much. Same with Cisco. Clearly, great stocks like these get greater when you get in early.
That's why conglomerates like General Electric or even mega-cap "techs" like Yahoo!
That's also why Tom Gardner focuses on small companies when recommending stocks to his Motley Fool Hidden Gems subscribers. It may even be why 12 of his team's picks have at least doubled since 2003 and why his entire portfolio is up 46.1%, versus 19.9% for the S&P 500.
Of course, I don't know that for certain
But your chances of catching a 15,000% gainer skyrocket when you buy small companies. I know that much. We just need to know a good story when we hear one. Or hear better stories. That's why you should meet Tom G.
Especially now that you can try his Hidden Gems service for free. There's no pressure to join, and you get three full years of great stories while you mull it over. That's more than 60 small-cap picks from the guy who told me about AOL in 1995 -- for free. To learn more, click here.
This article was originally published on Dec. 5, 2006. It has been updated.
Paul Elliott doesn't own any of the stocks mentioned. Dell, American Eagle, and Yahoo! are Motley Fool Stock Advisor recommendations. Dell, Microsoft, and Intel are Inside Value picks. The Motley Fool has a disclosure policy.
