How and why did you get started investing? What is your background?
I always had a casual interest in the stock market, going back to high school in the late 70s when I opened an account at a local broker and bought a stock about which I knew little except that the New York Times stock tables said it had a really low PE ratio-- I think it was 4, or something like that. It was an Amex-listed company called Outdoor Sports International (the ticker was OSI) and I think it wound up getting bought out, thereby maybe doubling the $200 or so I put into it. (I had no real idea what I was doing-- it was just semi-dumb luck!) Then in my senior year of high school I worked part time in the local Paine Webber office doing clerical work for one of the brokers-- basically, just helping him keep track of his customers' trades. In college though I mostly lost touch with stocks and when I graduated I wound up spending 17 years as a commercial and industrial real estate broker in the "outer boroughs" (Queens, Brooklyn and the Bronx) of New York City. I didn't realize it at the time, but working with a lot of different kinds of businesses actually turned into terrific "real world experience" for when I later became an investment banker and then a full-time investor. In the late 90s-- while I was still in the real estate business-- stocks were going crazy and my interest in them was rekindled. I wound up making a nice chunk of money buying low-PE microcap "value tech" stocks before they really took off like their big-cap brethren, while simultaneously losing some money shorting several of the bubble stocks because I didn't have the experience and fortitude to stick with them before they collapsed. However, on a net basis I'd made good money on the long side (and kept it-- I sold what at the time seemed to be "too early" but in fact was only "months" too early) and decided in January 2000 to sell my half of my real estate company to my partner to try to invest full-time. (Talk about top-ticking the market, and not in a good way!) I then spent a couple of years teaching myself a lot more about finance, studying scores of accounting and financial analysis textbooks, books about Wall Street history, etc. I then paid the most useful (and expensive!) stock market tuition possible: I fell in love with a microcap tech story-stock, rolled almost all of my previous profits into it and went to work for the company in a sales & marketing position. Well, being "inside" a story-stock and comparing that experience with its simultaneous press releases and earnings conference calls was one of the most valuable experiences an investor can have! After spending a year there I sold the stock at a huge loss, left the company (the product failed and most of the sales staff was laid off anyway), and decided that with a combination of my real-world business knowledge (from my commercial real estate days), book knowledge (from all the financial textbooks and history books I'd read) and story-stock knowledge (the experience I just related), I was ready to actually get a real job on Wall Street. However, this was 2003 and NO ONE was hiring, especially a 42 year-old guy with no previous jobs on the Street. Fortunately, one young guy running the New York office of a tiny investment bank saw my resume and was intrigued by the commercial real estate experience. He figured "This guy helped CEOs find their offices and warehouses and we help CEOs find their money, so if he can relate to CEOs one way he can relate to them other ways too." So he hired me on an "eat what I kill" basis (i.e., I'd get a percentage of the banking fees I brought in) and sponsored me for my Series 7 & 63 licenses, and I was off and running, cold-calling companies. I got a few deals done and simultaneously started investing again, mostly in microcaps but this time-- thanks to my own experience-- with a much better "smell detector," lol. My portfolio grew nicely and then in 2006 I went to a larger investment bank and had enough success there that I was recruited to a still larger bank in late 2007. All this time I was investing my own portfolio (even within the somewhat restricted confines of the various i-banks personal trading policies) and in 2009 I left my last i-bank to invest full-time, but this time with the goal of using my accumulated experience to open a hedge fund. I had really good returns in my personal account from 2005 through 2011 and had them audited to use as part of my fund marketing materials, and then in 2011 I opened Stanphyl. Continue Reading »