Did you get rich on a single stock?

[calmloki]

Yep…inherited shares of BAC…retired knowing that I could get by on the dividends and would have the continued growth to fund most anything else I could imagine…

Then came the banking fiasco and BAC's troubles….still decided to try and make it work rather than return to it….I'm sill poorer and still holding BAC….

To add to my incredible investment skills, when I sold the 3 rental properties that we owned at the peak of the real estate market, I also put those funds in BAC (before the meltdown) ….only to watch those funds melt away too….


Some of us never learn!!

I remember that episode as I had bought BAC at $26? for the fat dividends, then bought it when it went on sale at $20, then bought it a third time I believe. I block painful memories real effectively, but I think we sold before BAC hit the single digits. Don't I remember that your stock was purchased up in the $30+ range? Good for you hanging on when it got down to $6.

Edit: oh - and I don't recall holding the stock long enough to ever collect any of those fabled dividends. Think they chopped them just after I hit the buy button.

 

[Lancelot]

I stopped swinging for home runs- now I just try to get on base

 

[MichaelB]

An HR person I talked to once mentioned it when I asked about the elimination of options at the company. Something about a change in how options were treated on the balance sheet of the company. Some companies may continue with options, but I'm aware of at least a few that switched after SOX.

The change in accounting for stock options was not S/O, it was a FASB 123(R), done in 2004. It basically said that companies had to account for the fair market value of stock options when they were awarded. Before that it was a great deal for everyone, as companies could award lots of compensation and never show it as cost or expense. Of course, shareholders (and taxpayers) were paying for it even though it was never included in a financial statement. The FASB rightfully changed that, and when "free compensation" suddenly had a cost it became less popular.

Sarbanes Oxley did prohibit the use of option backdating. This is where the board awards an option grant to the CEO but instead of using the stock price on grant date makes it retroactive to the date over the past year where the stock price was at its lowest. Strangely, this was not always against the law. Changing that led to less use for executive compensation.

Nothing wrong with either of these changes, but that's IMHO.

 

[latexman]

Rich? No, but one time I did swing my entire 401k account into the company stock when there was a high profile financial emergency. After about 3 years my account increased about 4X, so I got out and diversified again. It was risky, but it was the best thing I've ever done.

 

[FANOFJESUS]

Yep…inherited shares of BAC…retired knowing that I could get by on the dividends and would have the continued growth to fund most anything else I could imagine…

Then came the banking fiasco and BAC's troubles….still decided to try and make it work rather than return to it….I'm sill poorer and still holding BAC….

To add to my incredible investment skills, when I sold the 3 rental properties that we owned at the peak of the real estate market, I also put those funds in BAC (before the meltdown) ….only to watch those funds melt away too….


Some of us never learn!!

That was pain full just reading it. Who would think that the bank stocks would do that.

 

[JacqJolie]

I was extremely lucky to be working for an energy marketing company in 2008 that went into bankruptcy protection due to trading losses in our parent co. in the summer of '08. We were all let go in late summer and I sold out of everything (was entirely in O&G sector). Was the only person hired back at a good consultant rate a few weeks later to work with the monitors and wind everything down. Started dipping slowly back in to O&G about Nov-Dec of '08 once oil touched the $30's and hit the LOC to load up once it looked like FAS 157 would be modified.
More diversified now sadly. This year was the wrong year to be diversified except that I was lucky to have partially diversified into gold mining and they've been having a pretty good year.
Still don't feel very comfortable investing outside of the devil I (hope I) know though.

 

[wingfooted]

I was extremely lucky to be working for an energy marketing company in 2008 that went into bankruptcy protection due to trading losses in our parent co. in the summer of '08. .

Enron ?



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[JacqJolie]

Enron ?



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Heheh, no. I had a friend that worked there though in 2001 I think? He bailed right away unfortunately - didn't LBYM, was worried about being laid off and couldn't afford to go 2 weeks without a paycheck. I heard the people that stayed got fantastic retention bonuses.

 

[LoneAspen]

Pretty ballsy move. Ever hear of Enron? I would seriously consider taking some chips off the pile if you can. So you only get a double instead of a triple. You might sleep a hell of a lot better.

Although the price it's trading at today is a life-changing amount of money, it's not so life-changing that I could FIRE off it. At least, not anywhere I care to live and buy a home.

If it doubles (which I truly do believe it will do in the next 18 months or so, based on current trajectory and future roadmap), then I'll be able to FIRE permanently.

If/when it doubles, I probably will take some off the table and at least get my own home, or diversify.

 

[Gallaher]

Aim-High and W2R have it right.
It's a tough roller coaster ride more akin to gambling than investing.
Sold the options and company stock the day the take over went public.
Cleared about half mil but it was emotionally draining.

Sometimes you have to concentrate risk to get the best returns.

I would not do it, concentrate on one stock, unless I was employed at the company and able to watch daily operations.

 

[athena53]

In the early 1980s, family members in the cable business told me to buy Comcast- it was "a good little company". My cost basis is about $2/share. I have a few hundred left. It's almost back to where it was pre-2001! So, I made a lot but should have sold back then.

A large chunk of my parents' wealth was fro Cray Research. Dad was an engineer and impressed with their supercomputers, so he bought in the 1970s. When an analyst at Morgan Stanley discovered it, it skyrocketed .

 

[G8tr]

We haven't become rich off a single stock, but between my employer's ESPP and RSUs that I receive as compensation, the amount of stock will represent a nice little (big?) dividend payment every quarter. My employer is highly-profitable and is a dominant player in its industry, so there is little risk in having a significant amount of my eggs in that single basket - at least for the foreseeable future. Otherwise, my wife and I keep fairly diversified portfolios.


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[dunkelblau]

I got a chunk of employee stock options from my first employer, a blue chip megacorp, and it barely scratched five figures on the pretax net when I left. My current situation involves a much larger stake, but it's late in the game for me so it's just icing.

I know firsthand of two cases of single-stock wonders, both involving employee stock options. My brother scored early and large at his first gig out of graduate school. And a former manager of mine had perfect timing leaving our company to join a customer. Both of these guys got paid-off houses from their exercise proceeds, but not enough to FIRE due to other life choices.

The irony is how among the three of us, only the one with the dud options was able to FIRE, and this I would attribute to the ability to sustain a very high savings rate that was enabled by life choices.

As for getting rich, I think that would be rare even among option grantees. The only case I know of I heard about through my current manager who goes to church with a young man in his 20s who grossed mid nine figures when his company was purchased by a household name. The irony in that story is that young man had aspired to work for that acquiring company back when he had graduated several years earlier, but he had to settle for a no-name backup when the job offer didn't materialize.

 

[clifp]

I have never actually calculated how much I made off Intel stock. I guess somewhere between 1 to 1.5 million over the 15 years I was there. Generally speaking I could have gotten a 15-25% raise especially by the mid 90s so it wasn't entirely free money.

My paper and realized profits on Berkshire are just under $200K.

 

[RobLJ]

Enron is the poster child, since I knew several who lost almost all their retirements when it went down. And there were a lot of casualties, so that's not anecdotal.
My wife worked for Dynegy at the time and the company match was in stock (and you couldn't sell it), but luckily I invested her side as far away from energy as possible. I told her before the crash that I wished we could invest in options to protect against a collapse--which occured about a year later and there was nothing we could do, since you couldn't sell the match.

It's not worth the risk of owning more than 10-15% in an employer or single stock.

We did fine, by the way, since my 403b and her withdrawals were outside of the energy sector, but at the peak I think Dynegy was almost 20% of the portfolio. I'm close, but not quite there to having gains that equal the original withholdings plus match, which is a bit incredible.

I will add that three of my core Fidelity funds--Contra and Low-Priced and the smaller-percentage Biotech--have comprised an eyeopening percentage of portfolio gains, despite rebalancing, sometimes frequently, over the last 10 years.

 

[RobLJ]

Short answer: Yes, a single stock will be responsible for almost all my net worth.

Long answer: I didn't plan it that way, and my path to retirement is one I definitely WOULD NOT recommend to anybody.

Never bothered saving much until I was in my 30's, and then when I left the IT field and got into real estate, I lost everything I had trying to keep that business running. Basically had to start over from zero again in my early 40's.

Was blessed enough to join a pre-IPO startup when they were still only about 50 people. I early exercised my entire original grant, and they've since IPO'd, and have a great roadmap ahead of them.

At the price it's trading at today, the value of my stock is a life-changing amount of money, but it's definitely "eggs all in one basket" which makes me nervous. But, I truly believe they have a lot of growth ahead of them, so doubling/tripling/etc is definitely possible. So for now, I'll leave all the eggs in one place. But if they double, I might start taking some of the money off the table to buy a house and diversify a little, just in case.

You're a grownup, but if that were my situation, I would take half (or more) off the chips off the table and let the rest run. Diversification and risk/reward. This was the same thinking at Enron, I would note.
Or use a trailing stop/limit order on a percentage, which would allow upside to run but harvest profits automatically. I'm using that on 5 of my high gainers in my brokerage account--none have triggered so far, so I have to keep renewing the 90 day order.
I'm prejudiced by watching my wife's Dynegy stock match go down from 40 to less thaan 1$ without the ability to do anything whatsoever about it, admittedly. But if you truly have all your eggs in a basket and you are nearing achieving your goals, you need to recalculate your risk/reward. IMO. What is the risk of having to work another 5 years versus another 20-25, like the Enron group, for example?
I tend not to sell everything, but I'm not averse to selling 1/3 to 1/2 of a position, just to lock in gains.

 

[MooreBonds]

I was a falling knife value investor. Trouble was I never seemed to ever find the value in them. Thank God I also had Exxon and Texaco at the time to mitigate most of the damage.

When I first started investing at the ripe young age of 15 (mowed lawns since age 10, started caddying at age 12, and parents gifted me a little), my Uncle Mick Cheap Bastard (TM) traits were already expressing themselves, as I scoured the stock pages, looking for low PE stocks trading around their 52 week low. My positions back then were concentrated to maybe just a few.

Of course, it took a few years and many losses to realize that the PRIOR 12 months earnings don't mean squat. The PE using prior 12 months earnings could be 1 - but if the future estimated earnings outlook was terrible, there's no reason for the stock to go up.

("But the 52 week high was 20, and this stock is at 10, a new low! And the PE is just 10!")

Spent a whole 7 years going from losses of 30% to break even, then 50% losses to break even, then 40% losses to break even. My third round-trip back to break even was around 2000. I was tempted to buy those insane internet stocks with infinite PE ratios (whichever few actually had earnings, much less any sales), but figured the market would crash just after I entered.

So I opted for the relative predictability of 7% returns with REITs and Muni ETFs.

Turned out to be an excellent choice, during the crash in 2000/2001, and continued gradual interest rate declines propping up fixed income and the real estate market.

As I finished school and started working, I next focused on emerging markets in around 2003, which also turned out to be a decent move.

But as my portfolio has grown, I greatly favor diversification. My top 5 largest positions are:

0.74% VWO
0.71% FBS-a (preferred stock of a local, privately-held bank, 8.15% coupon)
0.62% VB
0.60% HCLP (sand mine for fracking)
0.57% VSS

Having said that - from about 2005-2012, many times I would divert new money to sector bets, where I would typically find 1-3 companies in a sector that seemed to have decent valuations or prospects.

The downfall of being so widely diversified is that you are constantly on the prowl for new stocks to buy, although there seem to be more and more on my spreadsheet to buy, but just never enough money available! I try to limit new positions to about $3,500-$4,000 in size, unless it's a highly speculative position (like a biotech that has a 80%-90% chance of bankruptcy, or going to the moon), which would be about $2,000.

It's kind of fun having so many small positions in many companies that offer good value in different ways (dividend, dividend growth, left for dead by wallstreet, or an undiscovered up-and-commer).

 

[Symbiotic]

I chose to join a software company that was young but not a total startup, with a few promising, early customers and founders that were smarter than me. I passed on many other companies while biding my time looking for the one that felt right. It had a cashflow-positive business right away and addressed a major market need that seemed to have zero legitimate competitors. I received a significant chunk of stock option grants in the first few years.

We were about to go public when the IPO market dried up due to the recession, which bought us several more years to strengthen our position and improve our valuation.

I would still have been well on the way to ER without the company stock, because of LBMM and index investing. I also would have been happy with my career, such as it were, if the company did not become a multi-billion dollar success, because the people are fun to work with. But, make no mistake, the gains found at this cornucopia of capitalism were completely intentional. (And still very lucky, no doubt.)

I doubt that the anecdotes in this thread are statistically significant, but they are fun to read!

 

[Cobra9777]

I never invested in individual securities except via Megacorp employee stock options, restricted stock, and ESPP. I usually liquidated these positions as quickly as possible and diversified into low-cost index funds. But there was a brief period in the late 90s when I became intrigued with the company's outlook and held the stock way too long, even buying some in my 401K. Got burned pretty bad in the dot com debacle and returned to liquidating as soon as practical after that. I made many mistakes, but one of the smarter decisions I made was to liquidate 100% of my vested Megacorp stock in mid-2008 and held the cash until mid-2009, at which point I bought stock ETFs. I would estimate that - overall - the Megacorp stock resulted in roughly 20-25% of my current net worth, including a few options I'm still holding. Note however, that I did not intentionally "invest" in an individual stock. It was just compensation in the form of company equity, and I liquidated as soon as possible.

 

[shortstop14]

I guess I can say that a large part of at least my initial net worth growth was from fortunate investing in IT stocks. Working for an information services company in the 80s, I saw PCs becoming more and more common as tools, so bought into Microsoft with not much more than IRA contributions, and held on as it grew for a few years . Got out of that and into Qualcomm when the MSFT antitrust trial slowed the stock growth, just in time for the big uptick in that stock. Added to that was the purchase of every ESPP share I could buy in the IT company I worked for, which experienced much more steady growth during my 30 year career. Diversified into some other non-tech stocks like CAT and BRK.A.

Had my misses, too, but by that time I was diversified enough that the tech bust didn't crush me too badly.

I mostly attribute it to paying attention and to dumb luck.

 

[CyclingInvestor]

Enron is the poster child, since I knew several who lost almost all their retirements when it went down. And there were a lot of casualties, so that's not anecdotal.

Enron is a perfect example of why I think individual stocks should only be invested in if you are willing to watch them carefully. Enron had long been a very solid company, mainly in oil and gas pipelines. In 1997 they sold their liquid pipelines to newly formed Kinder Morgan (Kinder was COO of Enron) and proceeded to go into a bunch of new directions in which they had no experience - in essence becoming a new company. Huge red flag to me. Kinder Morgan has since done very well.

I like companies that stick to doing what they know. I do not like significant changes, and sell my stock in those that flail around.

 

[scrabbler1]

Even though the company stock I was acquiring through my company's ESOP was an add-on to its overall benefits package ("found money"), I had Enron on my mind as its value began to take off in the early 2000s. The ESOP rules at the time stated we had to keep the stock in our account until we left the company. But starting in 2002 we were allowed to diversify and sell up to 25% of our shares back to the company. While tempting to keep all the shares of the stock whose value had already quadrupled in 5 years, I still sold off 25% of the shares and continued to do so as I acquired new shares throughout the 2000s. In 2005, the 25% limit was increased to 35% so I sold off another 10% of my shares.

Some other ESOP rule changes reduced our annual allocation, as did my voluntary reduction in weekly hours worked in 2007. Had I not sold off all of those shares, I would have had more money when I ERed or perhaps ERed earlier (45 was early enough for me LOL). But I don't regret diversifying out of the stock with Enron and other companies weighing heavily on my mind in the early and mid 2000s.

 

[brett]

Stock options secured our retirement. The trick was to develop a selling program vs holding on to them in anticipation of realizing the highest possible sale price.

I still had some lapse after retirement because the market dropped and did not recover sufficiently.

 

[Cat-tirement]

Not rich, but AAPL is paying for our retirement home.

I used some "fun money" to buy a couple hundred shares in late 2000 as it was going down (still holding some of that), then bought and sold several times since then. Sold some off to make the down payment on the retirement house a couple of years ago. Renters are now paying the 3% mortgage until we are ready to use it. When that time comes, I'll sell most of the remaining AAPL to pay off the loan. When we sell our current house (no loan), that will become ER spending money.

I used a small portion of the profit to play in a few other stocks, with mixed results. Most of our retirement will be funded in the traditional manner, via pensions, SS, and 401k/IRAs in much safer mutual funds.

 

[Turboslacker]

. I would not do it, concentrate on one stock, unless I was employed at the company and able to watch daily operations.

However implementing a buy/sell transaction with such info is called "insider information"


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