| | | | GEOF SMITH'S TAKE
Turning Everyday Observations into Profitable Trades
Friday I told you about the time I inadvertently moved the market on a small stock that I had traded because my wife liked their clothes. The company was J. Jill.
Well, about a month after that whole situation, because that trade was doing so well, I asked her to give me another company that she liked.
This was back in 2000 — before online shopping had really caught on.
In fact, she recommended it to me by sliding a print catalog across the kitchen table.
This one you might have heard of: Williams-Sonoma (WSM).
Anyway, so I start flipping through the catalog — it’s all kitchen stuff — and I turn to her.
Before I can say anything, she says the same thing as when she recommended J. Jill to me: “It’s really good stuff!”
So I go into the office the next day and decide to check the stock out.
Turns out it’s and S&P 500 stock and it was trading just above $10.
By now I’d learned my lesson and saw that the stock had more than enough trading volume. Checked
Still, I placed a limit order (instead of a market order like last time) for $10.25 and got filled on 1000 shares.
Just like with J. Jill , I immediately turned around and put in a sell order for 100 shares every $2 and eventually offloaded all my shares.
So I got to thinking… you know this is working out pretty well. What other up-and-coming popular companies can I trade?
So it was getting into the spring of 2001, for some reason the retailers were doing really well. I don’t know why, but the retailers just took off.
So I started looking at retailers. I didn’t know a lot about retailers, but I noticed that when my kids’ friends came over, they all had a shirt with what looked like a moose logo where the breast pocket would be.
So I asked them, “I notice a lot of you kids are wearing this brand. What is it?”
They tell me it’s Abercrombie & Fitch. At that point, I had never heard of the company.
So sure enough I go into the office the next day and look them up. The ticker symbol is ANF and it’s trading around twenty something dollars a share.
I figured I had luck with the last two, why not?
In fact, after I picked up shares of ANF, I found another similar retailer called American Eagle (AEO) and picked up shares of that.
Both of them did real well for me.
But I’m not telling you this story to brag.
I’m telling you because if you remember my Byrna (BYRN) story, it all started with hearing about a hot new product or something that was gaining popularity.
You might have heard the old investing advice, “Buy stock in companies whose products you like.”
I like that advice, but with a twist.
See, if you like a product made by Coke or Johnson & Johnson, it’s such a big company that there’s very little chance a single popular product is going to move that company’s stock.
I like taking that advice, but only with small companies that have big growth potential.
Like Abercrombie, which was just starting to catch a wave of teen buyers. Williams-Sonoma which was soon to catch the wave of internet retail.
Today, that means a company like Byrna. When I discovered them less than a year ago, they were making just over $1million per year in revenue. That's a tiny company.
And they have a unique product that I think is going to have a lot of demand — non-lethal firearms.
You can imagine everyone from police departments to private security and even regular citizens just wanting something a cut above pepper spray will want to carry around their products.
So that’s my trading advice to you today — look around you. See what’s popular and get curious. Find out who makes it.
And if it’s a small enough company with a tradable stock — especially if it’s on a major exchange, consider picking up some shares.
Imagine if you had noticed Netflix (NFLX) launching their streaming platform back in 2007 or 2008, before it was everywhere. That would have been one heck of a trade.
— Geof Smith
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