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Jim Rooney: An Amazon-Sized Awakening

While Consuming, we should also be Producing and Investing

Our poor decisions and moments of regret can often carve pathways to future triumphs. If, that is, we engage in clear and self-effacing thinking. If we critically assess our errors, learn the lessons and make proper adjustments, we will begin shifting our mistakes and temporary failures into stepping stones to future opportunity and success.

My subject herein is investing. In my 35 years in the business, I’ve experienced both exhilarating successes and humbling failures, and along the way made every poor decision and mistake known to humankind. Here’s one that still resonates today:

In the early 2000s, I began shopping at Amazon.com. I bought a few books and music CDs (remember those?) and within the week the soon-to-be ubiquitous box was on my doorstep. Their software worked perfectly and provided better complimentary product recommendations than any store clerk I’d ever encountered. Thus, I often bought more than I’d intended. It was easy, convenient and life-changing.

In the nearly two decades since, as Amazon has vastly expanded its retail footprint and influence, I’ve joined millions in remaining an active customer and advocate.

So, what’s the mistake I’m lamenting? It’s simple, really. While shopping in this new and revolutionary way, I was wearing only one hat – that of a consumer – rather than also thinking as a producer and investor.

While I understood that Amazon was transforming my life, I never considered the same may be true for thousands of others – or tens of thousands, millions, tens of millions, hundreds of millions, or even a billion others. If I had, I might have recognized this life-altering investment opportunity.

The Missed Opportunity

I never did put investment capital behind my conviction by buying and holding shares of this revolutionary company. Here’s what I’ve missed: From May 1997, when Amazon was trading at $1.50 a share (accounting for stock splits) until today, the stock has risen to over $1,700 a share (Mar. 15, 2019). You can do the math. I’d rather not – it distresses me to put finger to calculator.

Worse still, the brutal bear market of 2008 took Amazon’s stock down about 60% to below $40 a share. At that tremulous moment, if I had backed my strong consumer confidence with an investment of say, $40,000 to purchase 1000 shares, I would today have a cool $1.7 million in Amazon shares. (I couldn’t hide from the simple math of 1000 shares x $1700 a share)

I must say though, I’m going easy insofar as any self-flagellation. After all, it wasn’t easy to buy stocks in chaotic 2008, never mind an internet book retailer regularly losing money. As exceptional as their shopping experience was, who knew they would soon revolutionize the entire retail industry and beyond? Certainly not me.

It’s Never Too Late

Amazon’s extraordinary achievements are rare, of course, but we can all think of dozens of potential investment opportunities we’ve let slip by. They are right in front of our noses because we are their consumers. We shop with them, dine with them, and otherwise use their services and buy their products regularly.

We enjoy Netflix’s video streaming, Google’s search and YouTube platforms, and Apple’s iPhones. We use Microsoft’s Office products to produce our work output. We share our lives on Facebook and Instagram and our opinions on Twitter. We buy sneakers and athletic gear from Nike, Under Armour, Lululemon and others. We shop for electronics at Best Buy and Costco, ship and receive packages through Federal Express and UPS, cruise with Carnival and Royal Caribbean, book hotels on Booking.com and TripAdvisor, lodge at Marriott and Hilton-branded hotels, drink coffee at Starbucks and Dunkin Donuts and grab lunch at McDonalds, Chipotle, Panera Bread and others. The list goes on.

As we wear our ‘consumer’ hat, are we also thinking as ‘producers’? Are we critically assessing these companies as potential investments? Are we consistently looking for the outstanding growth companies of today and tomorrow? Is this a mindset, a habit that we carry with us throughout each day?

Building Wealth Habitually

The wealthiest people I’ve met during my financial advisory career were generally from two classes: successful business owners, or, those who worked diligently for decades, excelled at their chosen careers and lived frugally.

Whether entrepreneur or employee, or a combination of the two, they had this commonality: They took educated risks by investing their savings in the greatest growth companies of their day. Generally, they chose the leading companies in industries they were most familiar with, providing them an advantage over their peers.
A generation ago, the growth names included Exxon Mobil, Proctor & Gamble, Johnson & Johnson, Pfizer, Walmart, Target, Home Depot, Costco, Disney, Coca Cola, IBM, Microsoft, Intel, Oracle, Cisco Systems, and many others. Each of these companies remains vigorous and in varied stages of reinvention.

Other former corporate stars such as Sears, Kmart, Toys ‘R’ Us, Eastman Kodak, General Electric, Worldcom, Enron, and many others, have been vanquished either by competition, incompetence or malfeasance. No one ever said successful investing is easy.

In the present day, while we have no crystal ball, we well know many growth companies of the next decade from the products and services we use regularly, either at home or work. They are changing our lives for the better, and in rare cases, revolutionizing it.

Caveat Emptor from a Master

It is important to note that I am not recommending the purchase of any of the companies mentioned herein, especially at this later stage of the economic cycle (2009 – 2019). I am instead advocating a new method of thinking and behaving: Consumer, Producer and Investor all wrapped into one. Let’s consider it the latest and perhaps more useful iteration of the ‘CPI.’

I most certainly am warning you away from active trading. Unless you’re one of the rare few, this is generally not a strategy for investing success. The greatest living investor, Warren Buffett, at the dawn of 24-hour-trading asked this: “24-hour-trading? When are people going to have time to think?”

One of Buffett’s main investment tenets is to “think a lot and act a little.” He believes every investor should have a card that gets punched each time an investment decision is made – a card with only twenty total punches over a lifetime.

“If we only had twenty,” Buffett says, “we’d think long and hard about every investment we make beforehand.”

He means we’d study the target company carefully to understand its business model and the value it presents versus its current stock price. We’d also consider the market cycle, interest rates and all other relevant data, and then we’d move forward judiciously. In other words, we’d “think a lot and act a little.”

If we are unwilling or unable to put the time and effort into this patient analysis, Buffett believes, we should be optimistic nonetheless and use a low-cost S&P Index fund as our chosen investment vehicle.

He believes in American style capitalism and thinks we should too. Warren Buffett’s undying optimism has made him the second richest person in world history. I’ve always considered it smart to listen to and mirror extraordinarily successful people in all walks of life. Here is a perfect example.

Ideas to Action

There are steps we can each take each day to put these ideas into action. Here are four:

  • As you navigate your way through the day, keep the acronym ‘CPI’ front and center. At all times, don the three hats of Consumer, Producer and Investor. This will ignite your latent entrepreneurial spirit and keep you aware and awake to our never-ending opportunities.
  • Carry a journal with you. Create a target list of investments and cull it often. Take notes – review them – add to them – discard some. Save interesting articles and ideas in an investment file and review them periodically. Make it an active, daily practice. Read target company reports. If you need help understanding their financials, seek help.
  • What retail stores, restaurants, services, leisure experiences, technology breakthroughs, etc., have been superb in your experience? Which ones have changed your life for the better, improved your health, helped your business efficiency, or provided you more time with your family? Are these exceptional companies trading in the public market? Will they soon be? Are you tracking them?
  • Always keep a reserve of cash available, especially when the market has tripled in value in the previous ten years (e.g. 2019). Consider the old Wall Street saw: ‘Pigs get fat, hogs get slaughtered.’ Be prepared, both financially and emotionally, to act when the market presents an irresistible opportunity, as it always will (e.g. 2008-09).

 

In sum, always remember what the Master Investor has taught us: Think a lot, act a little and methodically build your wealth. Until next time – stay well, prosperous and forever thrilled with our many blessings, good fortune and endless opportunities.