I’ve never owned shares of an energy company in the past. This one has sales of over a hundred million per quarter and it’s currently one of the top 20 energy companies in the country. My buying of the stock was based on the estimate that if things went well in the next few years, the company may jump into the top 10.
In all honesty, I bought this stock without doing any research on the company. Later on, upon further investigation, I discovered that its earnings per share were abysmal and the company was in a couple of lawsuits, trying to protect its patents. In other words, no educated investor worth his or her salt would have bought this company. But I bought it.
To answer this question, I’ll retell the story of Henry Ford, who woke up one morning and decided to design a car engine with all 4 cylinders cast in one block of steel. He assigned the task to his engineers, who worked for months on the engine to no avail. Finally, after a couple of years of work, they figured it out. In 1908, Ford’s Model T was introduced and the rest is history.
The lesson in this story is that Henry Ford imagined the future value of a 4-cylinder engine. He believed in something that wasn’t there and had never been there.
When I thought about this, I realized that we all believe, sometimes, in things that don’t make sense right now, but make perfect sense a few years later.
That’s why I bought this energy company. First, it makes power converting products that no other company is making, and second, it’s now creating a moat, which will be impossible to cross in a few years by any other company.
This month, the stock fell 40% since I bought it in January. What did I do? I doubled my position. Some guru investors would have called me crazy, but who cares. I’d rather act like Henry Ford than not act at all.
I’m sharing this with you not to foster random buying, but to encourage you to think about the future of the companies you buy the way you think about your future. Imagine great things happening to them, the way you imagine great things happening to you.
In investing, as in life, taking a calculated risk is one of our best strategies for advancement. Warren Buffett plays the “intrinsic value” risk, and he’s advanced beyond our reach.
With this energy company, I decided to play the “future value” risk. How far will I advance? I don’t know, but I believe in the future, which always comes one day.
The company in question is Power-One, Inc. (NASDAQ:PWER). Check it out and see the future bonanza for yourselves.