This is an account of my first stock investment. This happened way back in 1995.

The first stock I bought was Timberland – yes, the shoe Timberland. What is more important is that process which I went through to choose this stock. Truth is, there was very little process.

The first criteria that I chose was that it was a brand and a product that I understood and use. This was essentially the Peter Lynch principal. It was also a product and brand that was not frequently mentioned in the mainstream media.

I then decided to get the balance sheet and do some research. But hey, I just graduated from college and was one year into my new job and didn’t know anything about doing stock research. Still, I read the report cover to cover. I then decided to call their investor relations department and get research reports that brokerages have written on them. It took a couple of weeks for them to reach me. I read them (like just read them), kinda knew what the P/E ratio was. I also knew what the analyst ‘target price’ was and decided to take the plunge and buy some timberland.

It was sure an exhilarating feeling when you first make your first stock purchase. I went on to buy more stocks for myself. But if you’ve been reading this far, you will realize that the process is absolutely ameteurish. Yes, I knew the brand, read analyst research reports. But was enough?

I did not input their financials in a spreadsheet. I did not come up with the numbers myself. Instead, I relied on street analyst. I simply did not have any edge. I also should have asked the following questions :

1. Was Timberland’s sale seasonal

2. How was revenue recorded? When it goods are sold to retailers?

3. How did they get paid by wholesalers?

4. What was their main materials?

5. Are they hedging their material cost?

6. How much debt they had?

7. What was the rating on their debt?

8. What was the true value of the company if a private equity investor looked at it.

9. Who were their main distributors?

10. Which was their best selling models?

11. What was their new model pipeline?

These are just a few of the things that the research reports did not touch upon and on hindsight, things I should investigate before investing in a company. But I think not many of us will know how to truly investigate and do proper research on a company. And yet, there are many of people who are still ‘trading’ and ‘investing’ on their own doing haphazard research. This is the main reason why all of us should never do our own investing. We simply are not experts. And if you are, you should be working for a hedge fund and making seven figures every year!

What was the first stock you ever bought? Share your experience and comments here.

This entry was posted on Saturday, June 16th, 2007 at 19:57 and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.