Don’t Stop Fortune Hunting – Money Making Opportunities Are Everywhere

So close yet so far. Giraffe reaching for leaves.

When I was 23 I got lucky, very lucky. No, a Ford agency supermodel didn’t decide to stalk me around Manhattan and show me off to her beautiful friends in case we didn’t work out. Instead, a $3,000 investment turned into $155,000 in two months. The stock was VCSY a Chinese internet company with a homepage consisting of a simple dial pad. I had no idea what the company did except for the fact that Internet + China in December 1999 sounded like a fantastic idea during one of the greatest bubbles of our times.

VCSY went from around $3 to $6, did an inexplicable 20-for-1 stock split and then went up to around $9. In other words, it went from $3 to $180 pre-split and I had 1,000 shares. The stock’s move was one of the most ridiculous things I’ve ever seen as everybody I knew on the Street started piling into the name. I eventually got out of the stock at around $155 a share, netting a cool $153,000.

I proceeded to do what every foolish 23 year old would do and blow it on things! I bought a 600cc racing bike along with a second hand Volvo 850 GLT. At least I didn’t go out and buy a pound of coke. The safety of the Volvo was a way to balance out the risk of death during wheely popping attempts on FDR drive at 100mph. With both vehicles came insurance payments and a $300 a month parking bill. Yes, even back in 2000 parking was that expensive in lower Manhattan.

My biggest regret wasn’t actually spending $25,000 on goodies after the financial windfall. My biggest regret was not investing MORE into VCSY! I could have put in up to $20,000 worth in the name because I just received my first stub bonus after starting work in the summer of 1999. Meanwhile, the ritual of saving more of my after tax paycheck had begun because getting into work before 5:30am and regularly leaving after 7:30pm didn’t seem sustainable long term. Unfortunately, I was too chicken shit to dump everything into VCSY. If I did, the $20,000 could have turned into a cool million! Sob. So close, yet so far from being able to make it rain!

Ever since the spring of 2000, I’ve regretted not taking more risk. I swore to swing for the fences more often with the new found capital. Instead of fulfilling my oath, I decided to cower in the corner like a scared child in the night because the internet bubble began to burst in March 2000. After a couple $10,000+ down days thanks to reinvestments in B2B stocks like Ariba Technologies I bid the stock market casino sayonara! The one year time period of confusing brains with a bull market was over.

GOODBYE STOCKS, HELLO CAREER

VCSY price action in 2000

Instead of spending all my time researching the next VCSY, I decided to spend the majority of waking hours on work. Truth be told, a large part of the reason why I stayed until 7:30pm was for the free dinner buffets! No wonder I gained the freshman 15 all over again.

With friends getting fired left and right between 2001-2003, the best way to cope with a downturn was to keep my head down and be the best employee possible. Even after the markets started recovering, I still largely ignored investing in the markets.

Instead, I maxed out my 401(k) and began the allocation process of investing 35 cents of every post tax dollar into various funds in my E*TRADE account while praying there would be no more collapse. The other 30 cents was invested in CDs to ensure capital preservation while the remaining 35 cents just sat in a money market account waiting to be deployed into real estate, my favorite asset class.

Since 2001 a lot of money making opportunities presented themselves in the markets. Google went public and became a 10 bagger. Amazon and Priceline came back from the dead to be gorillas in their space. The homebuilders and financials got crushed while bonds and gold roared higher. I basically missed out on making outsized gains in everything because I was so concentrated on my career.

Although I received promotions and raises as anybody who works for 11 consecutive years at one firm would, I’m not sure whether I maximized my wealth creation. I was too scared to take any more concentrated positions because of all the financial casualties that began piling up. Several colleagues admitted to having their entire net worths invested during the 2000-2003 downturn. It was deja vu all over again in 2008-2009.

The last thing I wanted was to get no bonus, get fired, have my deferred stock lose value, and invest more money into a never ending market correction. I diversified as much as I could AWAY from the stock market into real estate instead. If times were good, I’d get paid. If times were bad as they frequently seemed to be, then at least I’d sleep better knowing everything wouldn’t disappear into thin air one fine day.

THERE’S ALWAYS A BULL MARKET SOMEWHERE

I know a lot of you think I’m crazy for whipping around my rollover IRA as if it were play money. But I’ve got to tell you that I frequently remember back to the years 1999-2000 where I didn’t have the courage to go all-in. Taking on risk gets even harder the older you get. Your 20s is a time to take aggressive, calculated bets as you’ve got a lifetime to make up for your mistakes. Who knows? You just might hit it big as well.

Given I no longer work, I’ve got 10 more hours a day to search for unicorns. The rollover IRA is the perfect vehicle to trade because it’s sheltered from the IRS until withdrawals are made. I don’t have to reconcile my trades every year during tax time any more and no longer does an employer see every ticket.

The chances are slim I will ever find another 50 bagger in public equity, but that doesn’t mean I’ll stop searching. What I do know is that if I do not put any effort, I will never make anything. 35 cents of every dollar will continue to be mindlessly invested in structured products or index funds hoping that everything always goes up and to the right. From now on I plan to rededicate my fortune hunting efforts. Bubble, please come again.

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Photo: So Close Yet So Far, Safari West, FS, 2014.

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    Wow Sam that was some big money! But guess making it a young age led to spending it on toys. I cant understand keeping you head down and working but I have realize that I have to take risks to get ahead. Not doing anything stupid but i put some money aside that I can afford to lose to make aggressive bets. I did this with Pandora (P), get in around 7 and have been making a killing with it. Not sure if the run is over but I have already made my money back invested and now im playing with house money.

  2. says

    I get nervous about any sort of aggressive investing based on limited intel. Maybe I’m too conservative, but the days of diverse stable investments that you regret make the most sense to me. In my opinion, at a certain point, aggressive investment becomes gambling.

  3. says

    The very first stock I invested in was Microsoft not long after the IPO. I put in $1000 and sold it for $10,000 a year latter. In hindsight, I should not have kept it much longer.

    I generally don’t spend much time looking for new single stock investments. But I’m willing to invest up to 5% of my portfolio in a single stock if I stumble across the right opportunity.

    • says

      Nice 10 bagger on MSFT in one year! Real company with real earnings unlike my VCSY that went to zero months later. It’s why I loved using all my stock gains and diversifying into real estate.

    • says

      That’s odd, since I know a guy I worked with put about $5,000 into MSFT two times back a little after the IPO. Then kept hold of it through all the splits. He had something like 1,600 – or maybe 3,200 – shares about 10 years ago now (after having only bought 100-200 back then. I just haven’t talked to him since then to see how well he’s doing.

  4. says

    Wow that is crazy! That is some insane money. Once my student loans are done for, we definitely plan on investing more aggressively, and that includes hunting for some high risk but potentially high reward investments.

  5. says

    I sold stock in a company for a small profit to buy my wife a new couch when she was pregnant with our first child; our existing couch felt like you were sitting on a boulder. Within a few weeks, the company signed an agreement with a major corporation and the stock price went through the roof.

    That $1500 couch, long since relegated to the basement, where it sits today, is now known as our $30,000 couch. It is comfy though.

    • says

      Dang that must be a comfy couch! The funny thing is, there are actually lots of designer couches that cost $30,000 or more nowadays. So maybe you got a vintage you aren’t aware of! One reader sold a desk of all things for like $100,000 after buying it for $500 or something crazy like that.

  6. nbsdmp says

    Sometimes the opportunities can be right in front of you…small businesses that have matured over time or run by not very savvy business people offer huge opportunities for upside potential. A lot of times people get lazy and let profit slip away that is right under their nose if they were willing to make some tough decisions or make simple changes…many times there are no succession plans in place and you can buy for a low multiple off of earnings that are way lower than they should be in the first place. It is a little more work than picking a stock, but it is kind of like real estate, you have a lot more control of the situation and the returns can be 20X or greater.

      • Bill S. says

        Sam,

        I totally agree. Case in point, my wife and I are runners from Santa Barbara county. Two years ago we were in Oakland staying at the Marriott, about an hour from the start of the Half Marathon when my wife, who woke up with a headache, collapsed in the hotel lobby. EMT’s took her to the local hospital, who, thank God, ambulanced her to your CPMC Davies Campus Hospital in SF where she was diagnosed with a burst brain aneurysm. Her life was saved by a wonderful neurosurgeon (Dr. Jeffrey Thomas). The point being, what are the chances this could happen to an athlete and what are the chances that we happened to be in the best place possible if it did happen ? You can plan all you want, but absolutely nothing is guaranteed so why not take a chance now and then while we are here for however long it might be? I apologize to everyone for getting off topic. By the way, she is fine now and back to the running which she loves so much. Thank you San Francisco and thank you Dr. Thomas

  7. Kris says

    Hey Sam, this is one of my favorite posts from you! I’ve been mulling the idea of a 100x investment ever since I went to a monthly angel meeting and they talked about one such home run. I can’t even imagine, though that is private equity. Kudos to your home run! Keep on chasing unicorns – good luck!!

    • says

      The folks who were able to get into Facebook earned a 1000 bagger. Private equity could be really good but there are a lot of landlines and it’s not liquid. I’ve got one PE investment that is holding strong for the past 7 years, by zero return so far until we sell!

    • DTS says

      Yeah, I’m not sure I have the stomach for that one, although I believe it is possible for those in the know. If it were legit why would they be making you privied to it? A lot of scams out there promising big returns. Ever watch American Greed?

  8. says

    I’m a lot less aggressive than when I was 22. I think having a family and being happy with what I have put a big damper on my aggressiveness. Now that I’m older, I’d rather hold on to what I have than taking more risk to make more money.
    I invested in a few private companies and those didn’t pan out very well so I’m now very gun shy about small companies.

    • says

      I feel the exact same way. I’ve been so satisfied with what I have since starting this site in 2009 that I totally lost te desire to fortune hunt in the stock markets anymore. I’ve been experimenting on living way below my means and trick myself into getting that hunger again, but it’s not really working.

  9. says

    That is a crazy chart and so awesome that you made such big returns on that investment. I’ve never really had a stomach for making huge bets so I also haven’t made any huge returns or losses. It takes risk to make big wins. I love your giraffe picture btw. He’s so close! If he’s patient and keeps trying one day he’ll get a big mouthfull to munch on.

  10. says

    Wow, talk about a return! That is crazy, especially with the split thrown in their to boot. I am not necessarily searching for a 50 bagger, but I definitely do look for opportunity and am probably have too high of a risk appetite…though I can sleep well at night. I trade in our Rollovers all the time as well. I love not having to reconcile all my trades and it’s sheltered, for now, from the government so why wouldn’t I?

    • says

      Exactly. Thank goodness for rollovers! The return was sick, and I’ve never had anything come close since. But perhaps a large reason is because I haven’t been looking.

  11. says

    I recently took 2 positions in stocks I think could be multi-baggers, and I generally think I have more gamble in me than most, but I just don’t have the guts to risk a meaningful portion of my savings on those real volatile type stocks.

    Back in 2000 I was in high school & took just about all my savings to that point and threw it into Agilent Technologies right after it spun off from HP. The stock exploded and I tripled my money in just a few months time. Then the bubble burst, and I naively held on for dear life thinking it was only a matter of time before things turned around and the rocketship would take off once again. By the time I came to my senses I actually took a loss on that investment. It’s probably still the reason I don’t bet too big on “growth” stocks.

  12. says

    What did you do with the rest of the $155K? My biggest payday was when I bought Amgen at $9 a share and sold at $45. I wish I would have kept it because it split several times over the years and it reached over $100 per share. My position was large enough that it would have supported my retirement alone.

    • says

      I decided to buy my first property in San Francisco in 2003 after letting it sit in a money market account for 2 years doing not much of anything. I’ll write a more detailed post about he journey in the future.

      So I guess in retrospect, the parlay into real estate from 2003 to now worked out OK.

  13. says

    Part of my stock market fund is to shoot for the stars, which is why I initiated a position in AGNC at a low dip recently. I feel I can make 3-5% in the short-term, so why not give it a shot? Life and money are all a gamble. Just by getting out of bed, anything can go wrong from a stubbed toe to getting hit by a bus. It’s the chance that a good buy or good event can happen that keeps me motivated.

  14. says

    This is a topic that I am just now starting to familiarize myself with. I fee terrible because I’m 28 and I have missed the better part of my 20’s where I could have been ultra aggressive. I still have plenty of time to invest, but as you said it gets harder with age. I do know that I need to be slightly less of a chicken though, that’s for sure!

  15. says

    I understand and perfectly approve of your desire for more wealth. I do, however, disagree with you that real wealth can be gained in a relatively short time span in the stock market. Aside from a few lucky cases like the one you described, there is poor track record for overnight stock market millionaires. Most successful investors do invest in individual stocks, but with long term perspectives.

    I think you are much more likely to get a fortune by expanding your business in creative ways.

    • says

      I agree. But it only takes one or a few to make a year or bet set for life. It’s not blind gambling or buying a lottery ticket.

      Just look at Tesla motors. I swear I was going to buy the stock, but that was the next day when they blew out earnings and gained 125%.

      There’s no harm in trying. A lot more wealth out there than you realize. Nobody knew about my windfall at that age. But it allowed me to buy my first property by 26 in SF and live a better life.

  16. Jonathan says

    Hey Sam,

    You’ve dropped some hints on this story a few times in your posts, but thanks for finally sharing the details. It’s very interesting and inspiring that this sort of thing can happen if you have the guts to do it! I am 24, been working for 3 yrs, and received an inheritance. I’ve put in 50% in real estate and 50% into index funds. I have roughly 80k in an after tax Vanguard account and after reading stories like yours I feel compelled to ‘search for unicorns’ as you say…but I don’t think I can stomach making an unwise/unlucky decision and losing everything!

    My one experience with trading is with the stock LNG. I’m in the oil and gas industry and I have strong feelings about the potential of natural gas in the USA. So much so that I put in 8,000 into the stock when it was at $8 and sold at $13 thinking I got lucky. Now it’s at about $30!! This makes me think about the possibilities, but also about how I’d feel if it went the other way.

    • says

      Yeah, this was the stock trade that provided the catalyst to invest into real estate and improve my knowledge of the fundamentals in stock market investing.

      What specific gas ideas do you have? Come share them in the forum starting 6/10.

  17. says

    WOW! that was quite an investment Sam! make me wish I’ll have that kind of luck in one of my investments. and, it’s never too late to take risks, though I have to agree we were more aggressive and risk takers when we were younger.

  18. says

    Hey Sam, Sort of similar situation but with worse outcome. While I was still in college I started putting a ton of money into this up and coming video game company. Talking legit penny stock on the OTCBB. Well by the time I graduated I was up $50k on it. I was psyched and I shoveled a ton more money into it. Well after some shady business deals and busted games that stock is basically bankrupt and I lost a ton of money which I’m still trying to recover from. I took your approach though, I might as well swing for the fences while I’m young because I’ll have many years to recover if things go south. Currently trying to get in on the bio fuel revolution with SYNM

    • says

      $50k in college is huge!! Man, I woulda gone nutso in college if I had that money. Is immediately get rid of my old Toyota hatchback, and got a Mustang 5.0 with the top down so my hair can blow.

      Did you invest more of your after college income into it which is why you are still recovering from it?

  19. JayCeezy says

    Awesome. Well-played!

    Perhaps this is my practical side coming out, but am I wrong to think the riskiest part of your adventure was “wheely popping attempts on FDR drive at 100mph”?

    • says

      Live fast, die young. Was this not your motto and every young man’a motto out of college? Maybe that’s just Wall Street testosterone speaking! You start feeling invincible until something happens like 911. Then you pontificate on what’s truly important.

  20. JayCeezy says

    LOL! That is a pretty cool story, but it should require ‘earmuffs’ for any Little Dragons in your home! I’m in the Laggard Quintile of the ‘longshot odds’ Bell Curve; never had your balls/brains, and my adventures always seemed to end with me flat on my back, staring up at the lights. They aren’t even cool stories like that one, i.e. last week I cut my hand on a chainsaw that was not even on. See what I mean?

    I wonder if that $152K profit in two months helped you land your first job? Just read that it is 3x harder to get a Goldman internship than to get accepted into Harvard. Wow. Continued success to you, and your quest for unicorns!

  21. Ricky says

    “What I do know is that if I do not put any effort, I will never make anything.”

    Why do you say this when your greatest successful investment was made when you barely knew anything but took chances? Which is better: to be lucky, or to know everything?

    I think part of investing and making mega returns is taking calculated risks but also using your gut to accept a large amount of risk in order to realize a large return.

    • says

      It took effort to formalize an investment thesis in VCSY, even though I didn’t know much about the company since it didn’t make any money. It wasn’t throwing darts but coming up with a China + Internet thesis in the Internet bubble and then spending hours screening potential Multi bagger names. Besides VCSY, I was invested in Yahoo and several other names that did well before the bubble burst. Luckily I got out with a majority of profits intact. I left about $35,000 in VCSY money on the table since I didn’t get out at the top.

      It is better to be lucky than good IMO. VCSY definitely is my best investment so far. But it is not my biggest absolute dollar investment return.

  22. says

    Sam, I also had a wonderful return on NFLX, watching it go from $23 to $260+ and then selling. I have learned so much since the days I traded the likes of NFLX, but I have to commend you on going into real estate at literally the perfect time, and it is true there is a bull market somewhere!

    Joe

  23. says

    It feels great to be one the right side of a bubble and terrible when it’s the other way around. My brother tripled his $$ in one day in Mindspring back in the dot com bubble days. My sister tried to get him to invest her money and he put it in Webvan…needless to say that was a rough ride. I’m a fan of more conservative investments- dividend & REIT ETFs, but I do have most of my eggs in one basket right now. It’s a biotech stock called Celldex Therapeutics (CLDX) currently near $15 per share. I’ve owned it for the past three years with a cost average of $4.64- it’s the future of cancer treatment in my opinion, with brain cancer patients living 7 plus years on its lead drug and impressive results in its second drug candidate for triple negative breast cancer. The pipeline is deep with another drug that works similar to Alexion ALXN and a fourth drug candidate similar to Bristol Meyer’s Yervoy. After the company is bought out or brings its drugs to market, I plan on re investing the proceeds back into more conservative investments that I can set and forget

  24. K says

    “At least I didn’t go out and buy a pound of coke.”

    LOLOLOLOL!!!!!

    Sam, what was your career in? Just curious–still a new reader getting to know you.

    I am just now familiarizing myself with investing in stocks and looking for that unicorn as well. Since you are now also actively searching, what are you looking for and what would be your criteria for identifying a multi-bagger? What is going to be your investment strategy now that you are actively searching?

    As someone just starting out of course I’m coming across several strategies.

    How do you feel about buying and selling on the upside of cyclical stocks?

    What about those who say its not too late to get in on Tesla, Amazon, Google, Priceline, etc? Do they still have more upside?

    What about this 3D printing thing that they are saying is the next big thing?

    What about piggybacking off of hedge fund positions?

    Thanks!
    K

  25. says

    Wow that’s insane! I pretty weary of aggressive investing too, but I think it’s because I have no experience in it. Eventually I’ll become more knowledgeable, and then I’ll be more comfortable with more aggressive investing.

  26. says

    Thanks for sharing Sam that was a great story. I actually just started investing this month and already sold some stock that turned a 6 K windfall. I know it’s not much money but for me it was a start. I think the earlier you start investing the better because the more you do something the theory is the better you get. Now that I am debt free I will start investing more aggressively.

  27. says

    Elon Musk is one of my heroes. I invested in PayPal back before eBay swallowed them up. Fast forward to today; I have money in Tesla and SolarCity and they’ve outperformed everything else in my portfolio this year. These are highly speculative and overpriced at the moment, but I’m in it for the long run.

    Besides my Musk-y Moonshots, I don’t take many chances anymore (CMGI anyone?). Most future money will go into LendingClub and Berkshire Hathaway. However, I’ll probably buy LC stock when they go public.

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