by Marc Bastow | December 7, 2012 1:35 pm
It’s every investor’s dream scenario:
You find a stock that you truly believe can change the world and thrive in any economy. You make a big bet on that company — the whole basket of eggs — and it just keeps on growing, making you so much that you’re able to retire early and comfortably.
Hey, it has happened. Ask this couple, which piled into Apple (NASDAQ:AAPL) in 2004 and never looked back.
But the reality is that 99.999% of the time, putting every egg into one basket and riding it out is a fool’s errand. The landscape is littered with nest eggs that were used to back big bets in stocks that looked great a long time ago but didn’t pan out, or did succeed for some time before falling back to earth, still rotting away in some uncared-for portfolios.
Take Hewlett-Packard (NYSE:HPQ). Did anyone who bought big into HPQ say, 20 years ago, expect the company to be the mess it is today? Doubtful. HP was a true pioneer in the technology industry with one of the best R&D shops in Silicon Valley.
But it has missed the boat in so many ways for the past few years. The PC business is coming to a crawl, the inkjet world has razor-thin margins, the server market is teeming with competitors Oracle (NASDAQ:ORCL), and acquisitions like EDS and Autonomy have been busts. All the while, it hasn’t been able to keep its C-suite in order.
If you had the foresight to start buying HPQ back in 1978 … well, you’ve got a long way to go before your 8,000% share appreciation dries up. But if you bought in a lot more recently and haven’t exited, you’re looking at some awfully pared-down returns or even losses.
How about Pitney Bowes (NYSE:PBI), once the worldwide leader in mail service technology, and an innovator in its own right? Back in 1950, it would’ve been hard to imagine a world where mail wasn’t on the upswing, and it would’ve been a brilliant bet. Heck, even if you bought only 25 years ago, you’d be sitting on a 3,000% gain. But the rise of FedEx (NYSE:FDX) and UPS (NYSE:UPS), as well as the email, taught Pitney Bowes that nothing is forever; in the past 10 years, your investment would’ve lost 70% of its value.
We can learn two important things from this:
You can’t do either if you don’t do your homework, though, so keep reading as much as you can — both about the company, and the world it resides in.
And if you do think you’ve found your own “next Apple,” just remember: Most all-or-nothing bets don’t result in a Honolulu condo.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long PBI and AAPL.
Source URL: http://investorplace.com/2012/12/one-sucess-doesnt-change-the-rules-of-retirement-hpq-pbi-ibm-orcl-fdx/
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