Goodbye to a Legend

I am sad to say my mentor has passed.  After an almost two year battle with cancer he's moved on to a pain free place.  To his wife, family, and friends: I'm so sorry for your loss.  He was a great man, always open and eager and honest.  Till I see you again, my friend.

One of the greatest to ever invest is gone.  Let's celebrate him!  

We'll refer to him as M, for mentor.  There were many sides to M.  He was a husband and friend and family man.  An artist.  If you'll excuse me here I'm going to keep this post more focused on his stock life since that's how we knew each other.  

M did not keep performance records because that's not what he cared about.  Never used a spreadsheet in his life.  I know some numbers from conversations and I believe he did 15-20% for 50ish years.  If we put him up on that famous chart of the super investors he ranks right up there with the very best ever.  

M was a stock broker for ~40 years.  He told me about one client who started with $20k that M turned into $10m.  Another started with $200k and died at $7m.  One client "has over a million with me, was totally broke but got lucky when he gave me some money and it worked." The amount he managed varied and a few years ago told me it was about $75m which he somehow put into this tiny small stocks market. If you followed my Hemacare story, M owned a little less than 5% of the company for himself and another 5 for his clients.  He bought many shares at $0.10 and held for the $25 buyout.  

ABSOLUTE LEGEND

M never wanted the spotlight or the accolades, only the hunt for value.  It was an obsession really, and spread throughout his life.  Picking up what others have discarded.  Looking deeper, being patient, connecting the dots and viewing things from a different angle.  

It's even right there in his art.  You see M had a masters in fine arts.  Never received a financial education beyond his own voracious curiosity.  Unfortunately I was never able to see his works in person.  He had pieces displayed now and again over the years.  His style focused on what is hidden in plain view, using photography and editing.  Showing people a different side of the ordinary they would otherwise just pass by and discard from thought.  Hidden meaning, overlooked features, a forgotten past.  

M grew up in housing projects with a sanitation man as a father and grandfather.  Dad understood the value of what many perceived to be garbage, M got that and ran with it.  In a high school economics class M jumped all over a paper trading stock picking contest and realized that would be his ticket out.  Made his dad open him an account since he was under age.  

"I spent hours during school breaks hitting the library and checking out every book, every magazine, and newspaper on the market I could find that made sense."

"In high school we had to choose 3 stocks and that started my interest. I just started reading, asking questions and on paper made money. I studied art and spent 10 years doing art, teaching and showing art..no money in that..but while in school spent all my free time studying stocks. Small stocks since that was all I could afford. I read Moodys manuals Standard and Poors..remember no internet back then. I found a newspaper in the school library called the OTC Market Chronicle which listed every single OTC security. On school breaks I was in the library researching and sending postcards for recent financials to all interesting companies. Went thru thousands of stocks. Organized a book for myself with room to keep updating financials. Invested when I could and it helped support me thru college. After 10 years became a broker, only specializing in small stocks."

"when I was about to move back to my parents house at age 29 there was an ad in the paper"want to be a stockbroker?" cut out the ad and carried it around for 3 weeks. My room mate and best friend insisted I had to do it"

Self educated and self made.  M's passion and focus on the treasure hunt were simply unbelievable.  He would look at every 10k and 10q that came up on otcmarkets and with the SEC. "I go thru every 8k 10q &k for familiar names and all the headline news from business wire prnewswire marketwire accesswire globenewswire I read the ones I know and some that I don't . If it's a low priced stock I check it out."  In 10 years of talking stocks I can count on one hand the number of times I mentioned a ticker he didn't already know.  

When M would go on vacation he'd tell me to let him know if anything happens.  I would email him some news and guess what, he already knew because he could not keep himself from following.  

M didn't use spreadsheets.  Paid for zero services.  Never ran a DCF.  Didn't even write things down.  His memory was incredible.  M owned several hundred stocks and could tell you the price and news on all of them.  He knew the history.  He knew what about them made him salivate and what gave him pause.  Not only that, but he knew about all the other low priced stocks he passed on and why.  Anytime I saw some obscure stock written up or talked about I would mention to M and he'd respond, "oh yeah I own some of that" or "sold that in a spike years ago."  Legend.

Forever an optimist, M watched the charts and news constantly.  Always looking for volume or a spike.  Scanning for breakouts.  Reading everything.  Buying all the time, little bit here and little bit there.  Every buy pushed forward by his optimism and belief in a bright future.  

In the afternoon after market close M would keep it going with a trip to the thrift store.  On weekends he'd line up at 6am to be first into an estate sale he'd scoped out during the week.  He used to tell me about seeing the same people all the time at those estate sales.  He wouldn't drink anything and bring just a bag of blueberries so he wasted no time at all with anything outside the treasure hunt.  The first time I had dinner with M and his wife, she told a story about going with him to an estate sale and seeing that excitement in M's eyes.  He was manic she said, energized by his imagination and the possibilities.  Throughout his life was this search for hidden treasure.  

M told me so many stories about books he'd find for a nickel that were worth hundreds of dollars.  Paintings sold to him for almost nothing worth thousands.  His art background combined with value investing.   Constantly searching and buying.  He had a friend that'd help sell it all through an online store.  Stored in his house.  He'd tell me about the games you play to get the very best deal, like hiding the first edition classic novel in a box of junk books bought for a dollar.  

M drove a Mazda.  Sometimes I'd wonder if he was wearing the same clothes as last time I saw him, and I would be surprised if they didn't come from a thrift store.  You would never know you're looking at one of the world's greatest investors.  He didn't need the hundred dollars return that rare signed book would fetch but that's not why he did it.  For him it was the thrill of the hunt.  Searching through box after box of CDs and records, week after week for decades.  Reading and following the same stocks year after year.  Eyes bright and child-like imagination racing.  Legend.

I started this blog in April 2015.  I wrote posts about GLGI, TIK, and then IEHC.  I used to mention my posts on the old yahoo finance message boards and M saw that on IEHC.  He emailed me in July 2015 to introduce himself and said if I like IEHC I might also like these other stocks.  It's a common thing people have done over the years but with M it was different.  We clicked right away.  I was a sponge and he knew so much.  I asked question after question after question and he always responded.  For years.  I'd ask why he did this and that, what was he thinking when he bought or sold XYZ stock.  

I was 34 at the time and M 62.  When I think back on the great teachers in my life he is right up there at the top.  My stocks email account shows 515 threads with M.  We would just email back and forth constantly with many per thread.  I'd bet there are 5-10k emails.  

He told me how he'd go to annual meetings of these tiny stocks sometimes and invited me.  We met in person for the first time at an ADDC annual meeting then went out to eat.  He handed me several bags full of annual reports.  Told me his office was stuffed with them.  I used to take a few at a time in my backpack to work and read them on the train.  I'd take notes and email questions/comments to M.  First one I looked into was HEMA: ~$0.30 at the time which got bought out for $25.  Another in that pile was COMX: around $1.50 then bought out for almost 10.  

SIMA was in there.  With the last trade at $1.25, M told me "I am the only person in the world that has an open bid of .10 cents. Monday I'm going up to .25 cents. If you plan to bid please don't outbid me..just match me. You never know, at year end with tax losses and general dumping of losers a seller could show up.."  Couple years later it was at $13.  

Death is hard and the finality really hit me yesterday when I got an email from a friend on my nonamestocks account.  For so long I would refresh that email all day hoping for a message from M.  We'd chat throughout the day about all these little stocks.  We only actually met up in person maybe 10 times.  Few ADDC and HEMA annual meetings.  We met up for dinner a few times and a couple with our wives.  Mostly it's been emailing all the time.  Almost online stock pen pals but really I don't know if there's anyone else I've talked with more over the past decade outside my immediately family.  

If you like my blog or my style, what you really like is M.  It's all his influence.  I think only 2 or 3 of the stocks I've written about since meeting M were not ideas he gave me.  He told me about Ted Warren in that first email.  His strategy was buying all these tiny, forgotten, obscure stocks then waiting.  He held hundreds of them.  Constantly buying what looks good and rarely selling, only when a stock seems over priced.  Always looking at charts for bases, resistance, and support.  Stayed away from banks.  Never buying things with a high absolute price ($5 is approaching 'high').  Always penny stocks.  Always micro caps or smaller.  Looking for low share count, low spot on the chart, low price relatively and absolutely.  He'd make decisions in seconds or minutes, though that is built on many years of knowledge.  He would hold losses forever if there was potential and still has probably a couple hundred dead stocks worth nothing.  He completely changed my way of investing and is directly responsible for my success.  I would be in a different place if not for M.

He would hold stocks for decades of patient optimism.  Bought ADDC for a quarter and then held for 40 years through two generations of family owners until the buyout.  Held CVV for decades from the pennies up to $18 then back down and back up.  I can't tell you the number of times he'd point me at some chart of a stock over 10 he said he bought way back when for cents.  

In that first email M gave me these names:

• ADDC was at 10 and I got bought out over 40
• HEMA was at 0.30 and I got bought out over 25
• IBAL I never owned but M told me this when he was finally done with it: "buyout at the end of the market day, IBAL at 1.74. Finally get to rid myself of that roach motel. "
• RDVA I got bought out but I don't remember the numbers
• ZMTP was around 0.75 and went up to a few bucks then fell to nothing
• BMRA was at a dollar and I sold at 20 and has dropped back while diluting 
• CVV rose up from 3 to 15 then fell back
• CLNT was a loser for years until M made money on giant spikes
• HICKA I never owned 
• MRCR was around 0.30 and recently got a buyout over 5.  
• MICT dead
• POLXF was around a dollar and got bought out over 2
• SLGD fell down then rose back up

A few quotes:

• The longer the base the more interesting the stock for potential strong moves when earnings break higher. 
• Support and resistance lines are like magnets. They draw the stock to them and then the challenge is to break the trend, the line to the up or downside. 
• Much is built into the price of the stock that discounts earnings turnarounds. It's the surprises, the contracts, the improvements to a balance sheet and perceptual changes that are catalysts for breakouts. Got to be aware of the trend, the parameters and the news. 
• Consider base patterns like construction foundations. Takes a while to build a building. After a lengthy time, the move skyward. Gotta have the base, the strong foundation.
• Selling is tough. I sold some BMRA when it jumped last year (Dan: BMRA had moved from 3 to 20 then fell back) and got most of my clients out at much higher prices. I think 7 is too cheap. Yeh it might go back to 4 and 7 would have been a good sell but who the hell knows. 
• Use HEMA as a template. 4 would have been a great profit., and anywhere up from there. I'm always in for the home run.  (Dan: HEMA got bought out at $25)
• It's got nothing to do with greed. I sell when a stock seems overvalued. I sold more PEYE AT 1.90 I just believe it's overvalued, but still am keeping some. 
• It all depends on the spikes and news and how much I'm holding. Gambling really, since there's no way of knowing when how high, how far back...just a guessing game. I'll hold if I think it's got good growth ahead.

I'll leave you with this one that came from some stock he was telling me about: "Yeh, another of my dead shit stocks that have nothing but who knows when potential."

Legend



--Dan

disclosure: long missing my friend