Secrets Of A Stockbroker, Or, How The Tampax Gambit Can Make You Rich. . .

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The people who are the most successful investors are the people who are good at predicting human behavior patterns. Remember this when you wonder why the market is rising when everyone in your industry says that business is terrible. Remember this when your company cuts a dividend and the stock goes up. Remember this when you buy the stock market on wonderful news like the end of a war, or the end of a long strike, and you wonder why prices suddenly head down. The stock market is a state of mind. Resisting your natural impulses to be euphoric or full of panic when the media demand these reactions will be your first step toward profit.

Jane the Impaler had asked me what my gimmick was. Anyone who is a successful investor has developed formulas that have worked well over the years. Some investors or money managers buy emerging technologies and concentrate on high-growth areas -- companies like Digital Equipment, Wang, or Apple Computer. Others use fundamental analysis approaching companies by combing their balance sheets and income statements looking for signs of impending advance in basic business and profits. There are technical analysts, also, who plot price history and trading-volume history for companies and markets, and claim to see patterns in their graphs and charts. If you play golf or tennis and find success with unorthodox swings, it doesn't matter if you have classic form. The payoff is a drive down the middle or a passing shot that wins a point. The same is true in the investment world. If you deal with a broker who has a run-down office over a candy store and the candy store owner has to call him to the phone and he makes you money, that's all that counts. Chic stands for nothing in the investment business.

There is a sure way to make money in the stock market . . . if you are patient enough to handle it. Most huge profits in the market in the past 10 years have been in companies that most people of substance have never heard of, or in a company that seems so boring that no one would buy it even if you called them and twisted their arms. I call this phenomenon the Tampax Gambit. The Tampax Gambit is too boring for ordinary market players. You have to seriously want to make money to follow it. It takes time.

The average person in the stock market wants satisfaction in a maximum of nine months. I have done a study over the past 20 years with hundreds of clients. The limit of patience of the investor's ability to wait in a stock, seems to be nine months -- perhaps it's a biological clock, the gestation period. Then something small explodes in the psyche that whispers to the investor, "You've got better things to do with your money. Roll it over into something new. It's too expensive to get a divorce or even a new car. Feel better. Get a new stock." Of course, the investment community helps this procedure along. The average stockbroker also is sick of watching the same stock go down or sideways for nine months. We hate to make mistakes. But for some of us, a commission eases the pain of being wrong.

Here's the Tampax Gambit at work. Tampax stock is recommended to the typical client in, say, December 1979.

Broker: I've got something for you to accumulate, Harry, a stock under 30. This is a stock with a fine dividend, a sensational balance sheet, and a product with almost universal acceptance.

Harry: I'm already nervous when you don't give me a name.

Broker: It's actually better than a 9% yield, no long-term debt, a product every woman needs.

Harry: You're not making me very greedy. Long-term in the shoe business is one season. Will I have to hold this longer than a season? Give me a name.

Broker: It's Tampax. Right near the lows at 29.

Harry: I got troubles with inventory already. And you're giving me Tampax?

Broker: Do you want to make money or do you want to screw around?

(The following response is typical of most players in the stock market.)

Harry: To tell the truth, I already made my money. When I come to the stock market, I come to screw around. When it comes to conservative, I put cuffs on my trousers.

Most people would rather play around than make money in the stock market Tampax (now renamed Tambrands) was a cheap asset when I bought it in December 1979. It had more than $90 million in cash on its books and zero long-term debt. It had an asset-to-liability ratio of better than 4:1 and a dividend of almost 10%. The stock was stagnant between 28 and 32 for many months. When the toxicshock scare hit some time later, Tampax again dropped under 30. But the dividend and the financial condition remained the same. The stock was boring, but it was never a disaster, and it always looked to me like a bargain. During this period, virtually every female client of mine and all the office secretaries responded to my inquiries that they did indeed use the Tampax product and would continue to do so. I continued to buy the stock because common sense, not the Wall Street mavens, indicated that I should do so.

I began selling the stock at 49 3/4 in January 1983. During several horrendous market periods, Tampax held its price paid me a decent return while I waited and ended up rewarding me far better than most investments in any area could have done over the same time frame.

The Tampax Gambit will continue to make value-oriented investors rich during the 1980s. Patience and the ability to accumulate, even in small amounts, shares in companies that are cash-rich and make common sense to the investor will reward the holder until he can afford to join the Harrys of the world, people who are only in the game to screw around. I'm old fashioned. Give me Tampax at 29. Give me profits any time.

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