Page 851 - How to Make Money in Stocks Trilogy

Black Belt Testing: Life-Changing Moments in Investing 117

The Early Years
Mike thought cheap stocks looked interesting, so he bought Ramada Inn
when it was under $5. He made a 13% gain, which seemed pretty good for
his first stock pick. But he quickly learned that duplicating that success was
going to be difficult.
Through the years, he was confused by all the information that was out
there and didn’t understand which methodology he should be following.
Mike had continually tried to be a bottom fisher because he never had
the confidence to buy a stock that was so far up from what he thought was a
low-risk entry price. As a result of continually buying cheap, low-quality
stocks that weren’t showing earnings growth, he frequently lost huge per-
centages on his individual stocks as well as having a meager overall portfolio
performance.
In 1989, an architect friend introduced him to IBD. Mike stared for a few
moments at the paper and all of its detailed information. “I was so absolutely
amazed that I almost had to sit in a chair,” he says. “This is what I had been
looking for all my life.” He made a plan in the back of his head that invest-
ing would be his retirement career.
Mike continued to be a subscriber to IBD, but time was in short supply
because he was busy with his own CPA firm. So although Mike bought
stocks here and there, he didn’t get serious about investing until 2002.
Mike began focusing on stocks that showed a rare combination of traits:
strong volume demand and stellar fundamentals. These are the market
leaders that exhibit earnings and sales that are far outperforming the market
averages, which is why they kept showing up in various features in IBD
week after week during their massive runs.

The Breakthrough
Garmin (GRMN) was one of the first successful stocks Mike bought in
December 2002, using the CAN SLIM Investing System. He bought the
stock as it was coming out of a cup-with-handle base and logged a 74% gain.
After a particularly grueling tax season in 2003 and buoyed by his success
with Garmin, Mike decided to really study the CAN SLIM System
intensely. He sat in his office for an entire weekend and printed out a huge
amount of educational pieces from Investors.com. As he read through the
material, he had an epiphany. Mike was beginning to put all the pieces
together: he needed to focus on stocks that had great fundamentals com-