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A Small Investor's Evolution

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October 24, 2012 – Comments (1) | RELATED TICKERS: BJRI

Board: SAS: BJ's Restaurants

Author: mazske

[This is from our Motley Fool Stock Advisor boards, a premium service. Click here to take a free, no-risk thirty-day trial of any of our services.]

I started investing back in 1990 by using mutual funds. I had no knowledge back then about the stock market and I'd read magazines like Money to find what I thought were good mutual funds. I remember I had ones like Janus and Kaufman and another or two.

In the late 90's, I was "poor", with two young children, a new mortgage and the various bills and a new job that didn't pay a lot. I read every financial book I could find in my local library.

I remember reading a Suzie Orman book and in the back, she listed www.fool.com as a link. The word fool got me to look at the site. I then read what books of David and Tom Gardner that I could find in my local library. I even remember standing in a bookstore reading a book of theirs as I didn't have the money to buy it.

I realized that I could buy individual stocks.

So, around July of 1999, I cashed out of my mutual funds and bought individual stocks. Oh, what a time. I bought stocks like AOL, Cisco, Microsoft, Celera Genomics, Eastman Kodak, Caterpillar, Kodak, Coke and more.

Then, a year or so later, the markets dropped and I rode all of my stocks from a higher amount than I paid, way down past my purchase prices and many hit a very low level.

During the early 2000's, I sold some of my stocks at a lost, bought some like Toys R Us that made me a profit and bought some that just held even or made a little bit for me.

Then, in 2005, with money still tight, I gave in and subscribed to Stock Advisor.

My first buy was SINA. I still hold this stock.

My 2nd buy in early 2006 and again later in the year was Netflix. I still hold those shares.

Between then and 2010 or so, I eventually sold off all of the non SA stocks and replaced them with SA stocks.

I learned to love to read Tom E's posts. I also read more stuff on the Fool by a variety of writers. I learned about buying in 3rds.

Yet, I had no new money to invest.

That is, until early this year. My oldest son was off to a free college and that helped us out.

So, in Feb, for the first time in a long time, I started putting new money into my account.

And, in February, I bought my first, at that time, non SA stock in BJRI. I heard about this company from Tom E, checked out their website, read about them and decided this company really excited me. This is what I read that first got me interested.

http://caps.fool.com/Pitch/BJRI/3423410/this-one-has-been-a-...

So, in February, I bought 7 shares at $49.99 per share. I bought 3 more shares in April at $46.37.

Then, in mid-June, I bought shares again, not once, but twice that day. I should have made one larger buy, but after one buy, I decided to sell a stock that I'm glad I did and I bought more BJRI. That day, I bought 4 shares at $39.18 and then 7 shares at $38.76.

In July, I bought 4 shares at $40.62.

In August, I bought 6 shares at $39.21

And, last Friday, I bought 4 more shares at $37.99.

So, I made 7 different buys of BJRI, each time paying a commission charge of $7. That's $49 in commissions.

My average cost, not counting commissions, is $41.91. Adding in my commission charge, it brings my average cost up to $43.31.

I have a total of 35 shares.

If I had a larger pot of money back in February, and I didn't have the knowledge I had now, I may have put it all in BJRI at that initial price of $49.99. If so, I'd be down a bit.

I was excited back in February with the price around $50 after reading Tom's Cap pitch and researching the company just a bit. They had 113 stores back then.

Now, they have 127 stores and the share price is much lower.

I plan to hold my shares hopefully for decades, if all goes well with the company.

If all goes well, and they keep adding stores, maybe one day getting up to 300, and then maybe one day getting up to 450, earnings should really go up, which hopefully means the share price will also go up.

With that many stores, you figure earnings should be much higher than today, so the share price should be much higher.

Odds are the share price will be higher than my first buy at $49.99.

If I had sunk 1K or 1.5K into BJRI at $49.99 and I held it for a long time, odds are I would make some money.

However, now I have a lower cost basis of $43.31, so that means I'll make a little bit more.

If BJ's ever turns into BWLD or PNRA and gets up to 1,000 or more stores, odds are I'll be very happy I have these 35 shares.

For anyone reading this who is just learning about BJRI since it is now a SA pick, I hope you study this company and feel as I do and invest in it.

Anyway, the moral of this story is this. Don't put all of your money into a stock at one time. Try to buy in thirds or maybe even do as I do and buy periodically as you have money.

If you do the math, you will see most times I was paying more than 2% in commission costs. I agree that I don't like to pay more than 2%, but at the same time, I'm very happy to buy stocks with only $150 or $200 as it means I can buy shares sooner.

By buying small positions since February, I've also added a few shares of companies like Disney, Panera Bread, Coach, 3D Systems, Whole Foods Market, Hasbro and Dreamworks Animation. If I waited until I had at least $350 or more to buy stocks, I'd not have bought as many companies as I did.

In 2 days, I hope to buy 2 shares of Cracker Barrel.

Once I do that, I do have a goal of waiting until I have at least $300 to buy shares in something. I'll pay a tiny bit over 2%, but that is okay.

My goal over the next few months, based on what these companies are selling for on the days I buy something, I hope to open new positions in Ulta, BRK-B, UA and maybe a few more. I also hope to add to my positions in quite a few of my current 18, soon to be 19, positions.

I still see myself as a small-time investor. Yet, most of my peers and co-workers see me as "wealthy" as they have no stock investments or retirement saving above and beyond the pension we get through our jobs.

Only time will tell if BJ's gets up to 300 plus stores and how profitable they are.

Only time will tell how profitable the various other holdings are.

I've yet to have a SpiffyPop, but I came close with Netflix, which has since dropped way back. I may get it with Apple, if it keeps going up a bit higher. It will be super cool to get that first SpiffyPop and hopefully over time I will get more.

Maybe BJ's will one day become one for not just me, but for many of you. 

1 Comments – Post Your Own

#1) On October 28, 2012 at 12:34 PM, MartianRtns (< 20) wrote:

two small comments:

*the commission on some of your trades was over 4%.  Minimizing your costs is a basic tenant of any good investment program and should override the need to invest as soon as you have funds to invest.  Course, this is up to you, and ultimately a fantastic pick can overcome these issues, but you give yourself an incredible burden by spending this much on each trade.

*If I were you, instead of using stock prices to space your purchases, I would use valuations.  For example, the valuation on Stock ABC is 2.4b with a PE of 28x at this price and a valuation of 2.2b with a PE of 26x at the next price.  What you will find is that unless prices vary by, say, 20% or more, there is little reason to invest immediately in the fashion you have been doing, especially in any high growth stock like BJRI whose susceptibility to decline was only one modest comp away, something that just happened. 

A final PS - sometimes growth stocks like this suffer from PE erosion as they come ever closer to saturation.  Now, maybe BJRI has many years of growth, but if they can't develop a secondary concept then eventually the market will revalue the stock to reflect the law of large numbers.  Thus, you statement that "If all goes well, and they keep adding stores, maybe one day getting up to 300, and then maybe one day getting up to 450, earnings should really go up, which hopefully means the share price will also go up." isn't always true, especially if you hold to the bitter end.  There are times it is best to exit. Any casual look at Value Line will show you this.

Final PS - I would read 'One Up On Wall Street" if I were you.  Just friendly advice.

Good luck with your investments. 

 

 

 

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