One of my investor friends drew our attention to something epic that had happened few days ago. Amazon had released another set of awesome earnings reports and CEO Jeff Bozos happily bragged that one of their business segments, Amazon Web Services, is growing revenue very rapidly. This made the analysts and investors extremely bullish on the stock and it jumped by $55.11, to close at $445.10 on 24 April 2014.
Here’s is the part where I am supposed to come in and say that I bought Amazon in 1997. But I didn’t. I was just a dumb ass kid back then and was probably playing void deck soccer or watching cartoons.
However, one guy had the foresight to do so though.
His name is David Gardner, one of the co-founders of the Motley Fool US.
Under him, the Motley Fool has pioneered a very controversial style of investing where they buy stocks that the general public or analysts deem to be over-valued and doomed for a correction. Of course they back up their buys with strong evidence, data and arguments about what makes the business worth investing in, but the sky high PEs tend to scare everyone else away.
So here goes the story:
David Gardner saw tremendous potential and bought Amazon shares on 8 September 1997 for a split-adjusted stock price of $3.21.
He held on to it all the way till the peak of the internet bubble when the stock reached a high of $85 – $86. ( That’s about a 26 bagger by the way.)
The bubble burst, stock prices nose dived and Amazon was worth about $5.97 at its lowest bottom. It then rose back to a median of about $15 in the following months.
Now, imagine watching your stock balloon to a 26 bagger, dropping to about a 1 bagger, and then watch it spend some time as a 5 bagger. Most people, after going through what seems like a traumatic roller-coaster ride, would probably just sell the stock as a 5 bagger to lock in their gains, and tell themselves that they had made a good decision.
Not David Gardner. He plays it cool and continued holding the stock till today.
He has held the stock for 18 years. When the magical day 24 April came, the stock jumped by $55.11. Based on the cost price which David Gardner bought in 1997 of $3.21, the stock jumped 17-times in one day.
In. One. Day.
Overall, Amazon has been a 138 bagger from 1997 till date. Dumping $10k into that stock would have become $1.38M in 18 years. And all you had to do throughout the years was….nothing.
Dear readers, this is truly the power and beauty of long-term investing. To ride the roller-coaster up and down, focus on the fundamentals, and hold on for more than 10 years. Let the magic of compounding do all the work for you while you get on with your life.
Maybe one day, you can tell me your story of how you got a 20 bagger in one day 🙂
( Click the image below to check out the book that David Gardner wrote.)
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