What I've learned from my first ten-bagger
True gold lies not in the stocks we pick, but in the lessons they teach us.
My first stock investment was more than just a financial win—it was a masterclass in patience, perspective, and the unpredictability of the market.
A warm hello to all new readers! I’m glad you are on board.
New here? I’m Michael and on a mission to make beating the stock market as easy for you as choosing your favorite ice cream. I write an algorithm that does exactly that.
Read the full story here.
It was December 2008, a month remembered not just for a lot of snowfalls in the Alps, but also for the valuation of Gold at just around 870 USD. It also marked the release of the HTC Dream, the smartphone that introduced the world to Android.
Fresh out of university, a junior engineer with dreams as lofty as fresh snow, I had just recently paid back the 7 grand of “student loan” my parents had lent me.
In those days, the gym sessions with my friend Dennis weren’t just about lifting weights; they were our think tanks. Since we were both newly hired, naturally our conversation led up to the topic of job security. Next thing you know, we were discussing economics and the stock market.
Since September, the market had been earning new lows, each day slipping off on a brutal downward spiral.
During this crash one company particularly stood out, Infineon the reputed chip manufacturer.
The announcement made by its new CEO, Peter Bauer, grabbed headlines. The company's losses were twice the expected amount. Within hours, the stock price plummeted - branding Infineon as a penny stock.
„Experts“ like Roland Sand from Credit Suisse were later quoted saying,
‘The market assumed that the risk of bankruptcy was at least 50%’.
That‘s ironic, as they are now “out” of business. Isn’t it?
Back then I pondered over Infineon’s staggering losses, especially considering their significant position in the automotive ECU market.
I wondered why Infineon faced such massive losses, especially given the fact that most of the car ECUs had these chips in them.
(ECUs are the small computers responsible for almost everything that happens in your car and are usually expensive to replace.)
Some of you might already know that, but the automotive industry sets high standards: it’s very common that parts must withstand extreme temperatures, from the icy -40°C/F to the scorching heat of +180°C /356°F. It’s a brutal test of durability, ensuring that every component can endure the most demanding conditions.
These rigorous testing processes effectively take suppliers through a massive challenge since it is not unusual for a part to fail multiple times before it passes the test. Frankly, it’s a pain in the ass for both sides. The slow pace of change in the sector puts even more pressure on companies that provide a critical component as it makes them indispensable to car manufacturers – a shortage of such components can halt production. And the bankruptcy of an entire company can stop production forever.
From the insider’s perspective, this makes some suppliers more or less systemically crucial for the car. Once a part is integrated, it becomes indispensable, woven into the fabric of the vehicle’s design. Both sides know that, so it’s crucial to understand the impact down the road so they can plan for the worst*.
Back then, this insider's perspective reinforced my conviction and led me to buy Infineon. I concluded that 0.73€ per share is a good price and hit the buy button. (And no, that’s not insider trading.)
Dennis was and is often my healthy counterweight with his rather skeptical attitude, and this time was no different. When I told him about my investment project, he had a look on his face as if I was touching a red-hot stove with full conviction.
Guess what happened? The stock continued to drop - reaching a low of 0.39 €. Confronting me with a nearly 50% book loss. That was a bitter pill to swallow but within seconds I adopted a new strategy called - hope, and inner self-talk, that things would just get better on their own.
Months later, I saw the first 100% profit. In the coming months, it continued to grow, much to Dennis's and my amazement.
My investment had not only recovered but soared, doubling, tripling, and more. Dennis watched in disbelief as the numbers climbed. “Are you nuts? Take the money!”
Curiosity overrode caution as I watched the stock soar. Each uptick in the price was a whisper, tempting me to hold on, to see how high the stock could climb. When I finally cashed out after three years at 7.70 € per share with a profit of over 1,000%, a cocktail of triumph and disbelief washed through me. It was for sure a moment of glory, fleeting yet intense, teaching me that 1) such highs are rare, and 2) unpredictable as they are exhilarating.
The triumph was intoxicating, a rush that crowned me, momentarily, as the king of my world.
So what do you do?
I bought a car. Yes - don’t judge me.
A fleeting trophy that I later traded (thankfully for the same price, because it was a special model) for a more enduring asset - a flat, my foundation for the future.
Only in retrospect did I realize how very lucky I was. Industry knowledge is a powerful tool, but it’s not a crystal ball.
The tide of fortune is a fickle friend, and the market beats to a rhythm of its own.
Conclusion
My initial triumph was an isolated event; I soon realized that applying the same strategy to other stocks didn’t yield similar results. In retrospect, it became clear that my early success owed much to lucky timing.
While possessing in-depth knowledge of a niche or industry is beneficial, it’s important to recognize its limitations. This realization led to a shift in my investment strategy. Now, I focus on the fundamentals—for me, a tangible and reliable aspect that offers a more solid foundation for decision-making.
So, as we walk the unpredictable paths of life, I keep reminding myself: that a deep understanding of a niche can give us leverage, but humility is our greatest ally. Never overestimate your market understanding and nobody can time the market at all times.
*(Here is what they don’t tell you: A single source is the exception today and (at least) two suppliers should split the risk in theory. But in reality, even this isn’t working as expected, as nobody invests in over capacities anymore. Here’s a more strategic approach: The supplier should show their capacity for a rapid production increase if needed, detailing both the method and realistic timeline for scaling up if the alternative supplier experiences a breakdown.)
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Peeking into our community’s reading habits, I’ve noticed some interesting overlaps. Many of you are also tuning into
, , , , , and .
Seems like we’re all part of an awesome club of insightful readers!If you haven’t checked them out yet, you might just find your next favorite read.
Progress
My neck’s finally giving me a break. All thanks to some solid advice from
Maverick Equity Research– hats off to you again!
And my wife? She’s on the up and up too.
This week’s been all about digging deep into research and coding. It’s not always the flashiest part of creating a program, but hey, it’s not all about the shiny moments. Right now, I’m knee-deep in setting up the daily calculations and figuring out a good way to keep the data from turning into a wild mess. I’ve got a basic plan ready and I’m itching to see how it works.
Here’s a quick slice of what I’ve been up to: dealing with tiny numbers in coding can make things go haywire. Like, if you divide 10 by something super small, say 0.000,000,001, you end up with a number like ten billion. Crazy, right?
But these numbers can be more trouble than they’re worth, especially when you’re calculating stuff like the P/E Ratios and other fancy numbers. Imagine a share price of $10 and earnings are almost zero. The result? Utter nonsense. That’s why it’s super important to just sidestep these little troublemakers in your code and calculations.Next up, I’ve been brainstorming how to feed my simulator fresh data every day without doing it by hand. I’ve got a couple of ideas in the pipeline. One’s about pulling a file from cloud storage and being mindful of not causing a traffic jam.
The other is a backup plan, just in case things get weird with the data traffic. Since the data I need is out there for everyone anyway, I’m trying to keep things simple. But I got my hands dirty learning how to set up a REST API and what can I say, it was an interesting date with great learning.While my algorithm training is running, I figured I’d get a head start on some other tasks. I thought about getting my old Mac to crunch some other numbers, but turns out, it’s better suited for lighter stuff, not the heavy-duty number crunching I had in mind. I’ve already tweaked the code to speed things up, and now I might have found another trick to kick it up a notch. Let’s see how that goes!
I’m also on the lookout for any smart indicators that can make my returns even more stable. So, I’m diving into some books for insights. Do you have any good recommendations? Drop them in the comments!
And for a bit of fun, I had this cool chat with a flight school. It was super interesting, and I can’t wait for my first trial lesson. Oh, and I might have daydreamed about planes because, well, we all need those goals to keep us moving forward, right?!
Plan
Guess what - beat my To-Do list:-)
What’s on my head
Never stop stretching.
Nuggets I’ve enjoyed
Have a great day StockStar!
Hit that heart if you love ten-baggers!
Michael
Recommend The Economy Rocket to your readers and friends
I share my stock investment story without sugarcoating – you get the good, the bad, and those tricky ego trips. I'm developing a service with a mix of smart code and proven investment strategies, making stock analysis a thing of the past if you wish. Because life offers so much more beyond the confines of stock analysis.
Disclaimer:
The information in this article is my personal opinion. I’m not a certified investment professional. It is not consulting, nor does it constitute investment recommendations.
I do my research carefully and follow my personal investment strategy.
The stock market is a complex building with its own rules. There are no rules set in stone, like the rules of physics.
Therefore, use the contents of this newsletter at your own risk and do your own research as well. Investing in the stock market can lead to a total loss of the capital invested.