Gut Strategies

By: Komal Bhojwani

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August 7, 2009

Fidelity Investments, which I think of as a bank for stocks, sends me a magazine every now and then, presumably trying to help me make smarter investment decisions, but the advice only makes me feel stupid: “Buying a stock without having an exit strategy is like embarking on a trip without knowing your destination.” This must be why backpackers and flower children have to economize—they don’t have exit strategies.

Here’s another one: “It takes more than a gut feeling to pick a stock that’s right for you.” In that case, I’m glad I’m not counting on the market for my retirement.

I think I have quite a finely honed gut, actually. Years ago, when I was a 19-year-old law student reading Forbes magazine in the bathroom, I saw an ad for a company named Sun Microsystems. A voice in my head said, “You should buy that stock.” I said to the voice, “I don’t know the first thing about buying stock! It’s like gambling, and I can’t afford that. And who the heck are you anyway?” Silence. The voice disappeared and I turned the page, chalking the whole thing up to constipation.

That was 1989. Sun’s stock was trading for less than $2. Eleven years later, in the heydays of the dotcom bubble, it reached a peak of $65. Every time I see the word Sun Microsystems, I think of that moment when something—call it my gut—told me to buy in.

A couple of years ago, while reading Fortune on the toilet, I read a story about Reuters. The voice said, “You should buy that stock.” I ignored the voice at first (especially because I’d been burned by jumping in at the peak of the bubble, only to have it crash on me three months later). But then, remembering the Sun story, I decided I’d rather regret a loss of money than a loss of nerve. So I bought some Reuters stock entirely based on my gut.

I bought Reuters for around $44 a share. As I write this, it's trading for $74. Sun, on the other hand, closed at $6.56. I"m not bragging. Well, maybe a little. But no matter what happens, my gut and I are in this for the long haul. And hey, isn’t that an exit strategy?

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