Can you spot a winner? I can. Maybe not always, 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 AOL for $1.66. That nets you another 10 grand. Your $1,000 investment in Cisco Systems balloons into $6,000 in 10 years.
You're probably wondering: "If I could bend time and space, would I only invest $1,000? Well, that's what you should be wondering. What you're really wondering is whether I'm pulling these examples 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 all three stocks I just mentioned (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 pretty much proven by 1995. They were all industry leaders ... run by entrepreneurial zealots ... they essentially printed cash ... and insiders loved them.
Just as important, they were only modestly huge at the time. That made them attractive to institutions but with 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.
A Fool named Tom Gardner
That's who turned me on to those stocks in 1995, plus the others in the table below. You may recognize Tom as a founder of The Motley Fool. He's also bald and tells decent stories. One day back 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 |
|---|---|---|---|
|
Dell |
$1.00 |
$39.85 |
3,885% |
|
AOL |
$1.66 |
$16.48 |
893% |
|
Cisco |
$3.07 |
$18.82 |
513% |
|
Texas Instruments |
$8.30 |
$28.94 |
249% |
|
Gap |
$5.11 |
$20.26 |
296% |
Actually, there were 10 stocks in all. After 10 years, we were up an astonishing 667% (versus 147% for the S&P 500) -- turning $10,000 into some $77,000.
But you could have done better Of course, you'd have to go further back in time and bought when companies like these were small. If you'd caught Dell back in 1990, for instance, you'd have ended up with four times as much. But could you have comparable gains on Coca-Cola
Clearly, with great companies, the earlier you get in the better. That's why, even when they're on fire like they have been lately, monsters like Johnson & Johnson
That's also why tiny Middleby, a maker of commercial ovens, had room to run more than 500% after Tom Gardner recommended it to members of his Motley Fool Hidden Gems service. It may also be why GlaxoSmithKline
Of course, I don't know that for certain But our chances of catching a 4,000% gainer -- or even a 500% gainer, for that matter -- skyrocket when we buy small companies. We just need to know a good story when we hear one. Or hear better stories. That's why you should meet Tom.
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 owns J&J and Coke. J&J and GlaxoSmithKline are Income Investor recommendations. Disney is a Stock Advisor recommendation. Dell is a Stock Advisor and Inside Value recommendation. Coke is also an Inside Value pick. Middleby is a Hidden Gems pick. The Motley Fool has a disclosure policy.
