Warren Boroson shares his experience with an insider tip and what great investor Edward Owens did with the same fact.
Edward Owens of Vanguard Health Care Portfolio doesn’t give many interviews these days, and I don’t blame him. His fund is huge – he doesn’t need more shareholders. Besides, the possibility of his making dumb mistakes during an interview is always there—recommending stocks he’s starting to sell, for example, or stocks he’s not finished buying. Besides, he has an awesome record. His fund is one of the best-performing funds over the past 20 years. Why would he need more publicity?
I did interview him once, and thereby hangs a tale.
***
I was once a medical journalist, working for a magazine called Medical World News and freelancing medical articles to, among other places, Better Homes & Gardens and the New York Times Magazine. And I once got a genuine, solid-gold stock tip from a reputable source in the medical field.
Pfizer was in a whole lot of trouble. It had manufactured a device called a Shiley heart valve, and every single one was defective. Every single one had to come out.
I owned 100 shares of Pfizer. I sold them—at $79.
And I watched, snug as a bug in a rug, as the stock gradually went down. To $77. $76. $74. $72.
Then, over the course of the next year, it went to $144.
Have you ever heard that happiness is a stock that doubles in a year?
I got a good definition of the word “misery.”
***
A year later, I’m interviewing Ed Owens.
Tell me something you’ve done that you’re really proud of, I say.
Well, about a year ago, he says, I was buying all the Pfizer I could lay my hands on.
“You bastard!” I said. “You bought my goddamn Pfizer!”
Okay, I didn’t say that.
I said, “Where were your brains, you ninny? Didn’t you know about the Shiley heart valve?”
Okay, I didn’t say that, either.
I said, how come?
Said Owens, I sat down with our analysts and we figured that if everyone with that heart valve sued, it would knock just one point off the price. Meanwhile, Pfizer had a great pipeline of new drugs coming along—including a little blue pill called Viagra.
Okay, I made up that line about Viagra. This was way before Viagra. Otherwise, that’s exactly what he said.
***
I don’t want to leave you with the impression that I am a complete and thorough idiot.
I took my $7,900 or so and invested all of it into Vanguard Health Care Portfolio. Thus buying my Pfizer back. And when Pfizer doubled, my mutual fund doubled. So there.
But that episode taught me a valuable lesson. I learned that even when I get an accurate stock tip, I’m apt to run in the wrong direction with it. After selling Pfizer and watching the price slide down, I should have leaped in and bought. And since I wasn’t that clever then, and am not that clever now, I learned that I should – by and large -- stick with mutual funds and avoid buying individual stocks.
Unless, of course, I get a really, really good stock tip.
Edward Owens of Vanguard Health Care Portfolio doesn’t give many interviews these days, and I don’t blame him. His fund is huge – he doesn’t need more shareholders. Besides, the possibility of his making dumb mistakes during an interview is always there—recommending stocks he’s starting to sell, for example, or stocks he’s not finished buying. Besides, he has an awesome record. His fund is one of the best-performing funds over the past 20 years. Why would he need more publicity?
I did interview him once, and thereby hangs a tale.
***
I was once a medical journalist, working for a magazine called Medical World News and freelancing medical articles to, among other places, Better Homes & Gardens and the New York Times Magazine. And I once got a genuine, solid-gold stock tip from a reputable source in the medical field.
Pfizer was in a whole lot of trouble. It had manufactured a device called a Shiley heart valve, and every single one was defective. Every single one had to come out.
I owned 100 shares of Pfizer. I sold them—at $79.
And I watched, snug as a bug in a rug, as the stock gradually went down. To $77. $76. $74. $72.
Then, over the course of the next year, it went to $144.
Have you ever heard that happiness is a stock that doubles in a year?
I got a good definition of the word “misery.”
***
A year later, I’m interviewing Ed Owens.
Tell me something you’ve done that you’re really proud of, I say.
Well, about a year ago, he says, I was buying all the Pfizer I could lay my hands on.
“You bastard!” I said. “You bought my goddamn Pfizer!”
Okay, I didn’t say that.
I said, “Where were your brains, you ninny? Didn’t you know about the Shiley heart valve?”
Okay, I didn’t say that, either.
I said, how come?
Said Owens, I sat down with our analysts and we figured that if everyone with that heart valve sued, it would knock just one point off the price. Meanwhile, Pfizer had a great pipeline of new drugs coming along—including a little blue pill called Viagra.
Okay, I made up that line about Viagra. This was way before Viagra. Otherwise, that’s exactly what he said.
***
I don’t want to leave you with the impression that I am a complete and thorough idiot.
I took my $7,900 or so and invested all of it into Vanguard Health Care Portfolio. Thus buying my Pfizer back. And when Pfizer doubled, my mutual fund doubled. So there.
But that episode taught me a valuable lesson. I learned that even when I get an accurate stock tip, I’m apt to run in the wrong direction with it. After selling Pfizer and watching the price slide down, I should have leaped in and bought. And since I wasn’t that clever then, and am not that clever now, I learned that I should – by and large -- stick with mutual funds and avoid buying individual stocks.
Unless, of course, I get a really, really good stock tip.
