Buying Stocks

Please note that I am on the road w/o the cord to download pictures. I can update the blog, but I will have to add the pictures later, so stop back if you want to see the pictures that go with the trip.  

I drive down I-85 all the time on the way to the tree farms, but I never go south of South Hill, VA. As far as my personal experience goes, the world could just end ten miles south. I would have no way of telling. Well today I went a bit farther and I can report that it looks a lot the same.

We drove down to Charlotte, NC to attend the annual stockholders’ meeting of NUCOR Steel. I have never been to a stockholders’ meeting before, so I thought I would enjoy the experience. My shares are worth almost nothing in the great scheme of things, but they still have to let you in even if you own only one share.  

NUCOR is one of the first stocks I bought in the early 1990s and one of the few that I still own from that time.  It grows reasonably well and pays a regular dividend, but that is not why I bought it. I liked NUCOR because I read so much about it in the business books I used to love. NUCOR is a mini-mill steel producer.  They were profitable at times when other American steel giants were rusting away. The CEO at the time, a guy called Ken Iverson, was one of the saints of the B-School set.  He was smart and innovative. He ran his front office with only a staff of a couple dozen, lean and agile.

Investing in stock was a great education for me.  It is much more interesting to look at companies when you have a stake, no matter how small, in the outcomes.  I no longer invest in individual firms. I don’t know enough about it anymore and other interests (mostly forestry) have dulled my never particularly acute business acumen.  It is better for somebody like me to stick to indexing.  But I still keep a few of the original stocks, among them NUCOR, which I admit I keep more for tradition than investment, as long as they do acceptably well.  

My most productive firm has been Vale do Rio Dolce, a Brazilian company that mines ore and exports a lot of it to China, so it has done well over the last decade.  It is also just a great company. I bought it in 2001 and keeping an eye on it has given me useful insights into business in Brazil and international trade in commodities.  So sad that I have to get rid of it this year, since it is a big firm in Brazil and it could create the appearance of impropriety when I am down there working for the USG.    

On the other end, I have a firm called Dyadic. They make enzymes potentially used to create inexpensive cellulosic ethanol. That is how I got interested. Unfortunately, about a week after I bought it, somebody in a Chinese partner organization was found to have cooked the books. For a while it was dropped from the exchanges. When it came back, it was worth less than 10% of what I paid for it. Talk about bad timing.  I didn’t bother to sell it, mostly because it was not worth it. The broker commission would have accounted for a large percentage of the total proceeds.  Besides, I like to keep it around as a reminder against the sin of unwarranted pride.  Since then it has come back a little, but I don’t expect ever to break even on this investment. That is the one that made me understand that my confidence in investing had overtaken my competence. I had a reasonable understanding of the product and the markets, but the accounting thing is just beyond my ability.

When you add it all up, I probably have made as much money in the supermarket (buying things like spaghetti sauce on special) as I have in the stock market, but I have made a little and it was more interesting than just putting the money into the bank. I learned a few things along the way about how business works and I learned that the market is smarter than I am, hence the reliance on indexing. People who learn that lesson young are usually better off than those who learn it when they are older, or not at all.

I will write about how the NUCOR meeting goes tomorrow.