A Successful Physician Sets the Example

Physician's Money Digest, November 2006, Volume 13, Issue 11

Successful-investor anecdotes can often influencesuccessful investing. One such anecdote details aretired physician who has done unusually wellin the stock market. Stock market success post 2000has been quite elusive for most investors. If you weresuccessful in the stock market post 2000, and particularlypost September 11, you clearly did things differently,like this physician-investor.

Investor profile:

  • 92-year-old man, a retired general practitionerphysician
  • Self-proclaimed "old-school doctor," he performedmajor surgeries as far back as the 1930s
  • Battlefield surgeon with the 1st Infantry duringWorld War II. He served his tour of duty inNorth Africa and Italy
  • He made and kept millions in the stock market.

You may recall the Asian financial panic of 1998that left Asian stocks selling for a fraction of whatthey had traded for in the summer of 1997. Whatyou may not have realized at the time was that qualityAsian utility stocks were trading very cheaply inthe stock market, and as such, represented unusualbuying opportunities. This doctor bought 3000shares of SKM, a Korean cellular utility, at $6 pershare in August 1998 for an $18,000 total investment.This doctor sold most of that position 11/2years later in March 2000 for over $150,000 in proceeds.The Asian financial panic had past by March2000, such that many quality Asian stocks hadrecovered in price in the stock market. The doctorreinvested the proceeds, mostly in the year 2000 andearly 2001, into a diversified group of stocks basedon the same reasoning as the SKM purchase. Recallthat most stocks in 2000 were selling at very highprices. The doctor bought only stocks selling at lowprices. Low-priced but quality stocks were rare findsin 2000 and early 2001. The stocks the doctor purchasedincluded HNP, KEYS, VSAT, GEO (formerlyWackenhut then GGI), GOTO (which becameOVER, which was taken over by YHOO), as well asa few others.

This doctor's $18,000 investment in 1998 is worthclose to $450,000 today. The doctor still owns mostof the shares he accumulated in 2000 and 2001 andsome of the SKM shares he accumulated in 1998.The big question is: Can you duplicate this successwith your SEP IRA, Keogh, or pension plan account?The answer may be yes if you do the following:

1. Develop an investing game plan, which willwork in good times as well as in bad times.

2. Be an independent thinker. Advice receivedfrom family, friends, and associates will probablyprove inaccurate in the long run. Popular investmentideas rarely work long term.

3. Buy quality but unpopular stocks when they areselling down in price.

4. Don't panic on dips; be a long-term holder ofstocks. Despite the media frenzy, this doctor did notsell into the year-long stock market panic afterSeptember 11, 2001.

Stephen K. Vaughen is the owner and principal investment advisor/money manager of Pacific Investment Advisors LLC, investmentadvisor representative, and a Series 66 licensed investmentadvisor. Pacific Investment Advisors LLC is a California limited liabilitycompany and an SEC-licensed registered investment advisoryfirm. He welcomes questions or comments at 866-693-6463, 805-955-0650, or svaughen@pacificadvisors.biz. For more information, visit www.client.pacificadvisors.biz.