The Greatest Stock Picker I Know

This is a real story that's played out over the last 12 months. It's about a client of mine who happens to be my wife's Aunt. Aunt Ann is a retired schoolteacher from rural Texas that never invested prior to asking me to help her with some inheritance she recently received.

Three things make Ann's story compelling. First, she has no formal training in stock picking. Second, she has absolutely clobbered the returns I've generated for her. Third, these are the returns of the stock she bought leading up to her purchase.

2013 2014 2015

-51.46% - 48.78% -34.86%

That's some deep, deep discounting right there. Investment purists would call this a "value" stock (or garbage, take your pick).

Background

On September 25th, 2015, Ann called me and asked if I would buy $2,000 worth of Canadian silver mining stock First Majestic (symbol: AG). I tried to talk her out of it using all my typical "you can't beat the market" and "this commodity play is insanely risky" to "this is on you if it flops". None of my sound rationale worked. I swore in 6 months she'd be calling saying I was right.

Then the stock started its run...

What Actually Happened

Ann picked up 622 shares of the First Majestic for $3.20/share. This is what that stock has done since that time.

Today it's trading at $11.96/share, representing a 284.8% gain.

Compare That To Her Diversified Portfolio

In the same time period, her globally diversified balanced portfolio of low cost & tax efficient index funds has returned 3.98% net of all fees.

Ok, I got schooled. And I love it!

The idea that a retired schoolteacher from Texas who's only other investment is 30 head of cattle that she occasionally consumes (eating into her return, hahahahaha) has picked such a huge winner in a sorta stalled out bull market is astounding! Kudos Ann, you crushed it!

Realize It

Next week will mark Ann's 1-year trade anniversary. This is important because it's when her short term capital gain taxed at the ordinary income rate becomes a long term capital taxed at a lower 15%.

We'll talk about what she ultimately wants to do with the stock, but I bet she's going to sell most, if not all to lock in (realize) her gain. Assuming the stock doesn't drop back down to $2 in the next few days she'll have nearly tripled her investment in only one year.

Let's All Do This

No. Let's not.

I've only ever had one other client make such impressive gains betting on a stock. He bought Netflix way back in 2009. This kind of thing is the exception, not the norm.

Statistically, Ann got lucky; she singled out an obscure silver mining stock in a universe of over 18,000 publically traded companies. She also got the timing correct on the buy trade, and she's probably going to nail the sell trade next week as well. Professional fund managers can't get this right!

Ann wanted to try something fun, and it didn't matter if she lost money. Her pension income doesn't change if her $2,000 bet goes bad. Not all investors 1. can afford this luxury and 2. can stomach picking a stock that ends up going bankrupt.

Why Ann's Story Matters

It matters because I talk about the same things all the time. I wanted to share something fun for a change.

It also matters because we love to cheer for the underdog.

Last, it matters because Ann's story represents a small slice of the American dream. Don't we all fantasize about making a big score in the stock market? How cool would it be to brag to all our friends!

Ok, so Ann probably isn't the best stock picker I know. To earn that title you have to be consistently good, and one favorable bet doesn't make someone the best. Let's see what her track record is after 100 more trades.

We're all rooting for you!