Beating the Street Read Online Free PDF

grade,” Ms. Morrissey says, “so there was no question about whether to own Topps. Again, Topps produced something the kids could actually buy. In doing so, they felt they were contributing to the revenues of one of their companies.”
    They got to the others as follows: Wal-Mart because they were shown a videotaped segment of “Lifestyles of the Rich and Famous” that featured Wal-Mart’s founder, Sam Walton, talking about how investing benefits the economy; NYNEX and Mobil because of their excellent dividends; Food Lion, Inc., because it was a well-runcompany with a high return on equity and also because it was featured in the same video segment that introduced them to Sam Walton. Ms. Morrissey explains:
    â€œThe focus was on eighty-eight citizens of Salisbury, North Carolina, who each bought ten shares of Food Lion stock for one hundred dollars when the company went public back in 1957. A thousand dollars invested then had become fourteen million dollars. Do you believe it? All of these eighty-eight people became millionaires. These facts impressed all the kids, to say the least. By the end of the year they had forgotten a lot of things, but not the story of Food Lion.”
    The only clunker in the model portfolio is IBM, which I don’t have to tell you has been the favorite of professional adult money managers for 20 years (yours truly included—grown-ups keep buying it and keep wishing they hadn’t). The reason for this destructive obsession is not hard to find: IBM is an approved stock that everybody knows about and a fund manager can’t get into trouble for losing money on it. The St. Agnes kids can be forgiven this one foolish attempt to imitate their elders on Wall Street.
    Let me anticipate some of the criticisms of the St. Agnes results that are sure to come from the professional ranks. (1) “This isn’t real money.” True, but so what? Anyway, the pros ought to be relieved that St. Agnes isn’t working with real money—otherwise, based on St. Agnes’s performance, billions of dollars might be pulled from the regular mutual funds and turned over to the kids. (2) “Anybody could have picked those stocks.” If so, why didn’t anybody? (3) “The kids got lucky with a bunch of their favorite picks.” Perhaps, but some of the smaller portfolios chosen by the fourperson teams in Ms. Morrissey’s class did as well as or better than the model portfolio selected by the class at large. The winning foursome in 1990 (Andrew Castiglioni, Greg Bialach, Paul Knisell, and Matt Keating) picked the following stocks for the reasons noted:
    100 shares of Disney (“Every kid can explain this one.”)
    100 shares of Kellogg (“They liked the product.”)
    300 shares of Topps (“Who doesn’t trade baseball cards?”)
    200 shares of McDonald’s (“People have to eat.”)
    100 shares of Wal-Mart (“A remarkable growth spurt.”)
    100 shares of Savannah Foods (“They got it from Investor’s Daily.”)
    5,000 shares of Jiffy Lube (“Cheap at the time.”)
    600 shares of Hasbro (“It’s a toy company, isn’t it?”)
    1,000 shares of Tyco Toys (Ditto.)
    100 shares of IBM (“Premature adulthood.”)
    600 shares of National Pizza (“Nobody can turn down a pizza.”)
    1,000 shares of Bank of New England (“How low could it go?”)
    This last stock I owned myself and lost money on, so I can appreciate the mistake. It was more than counteracted by the boys’ two best picks, National Pizza and Tyco Toys. These four-baggers would have done wonders for any portfolio. Andrew Castiglioni discovered National Pizza by scanning the NASDAQ list, and then he followed up on his discovery by doing some research on the company—the crucial second step that many adult investors continue to omit.
    The winning foursome in 1991 (Kevin Spinale, Brian Hough, David Cardillo,