4 fundies share the lessons from the first stock they ever bought

What was the first stock you ever bought? I’m sure you can name it instantly. Perhaps with fondness or perhaps with wry regret depending on the outcome. Regardless of what happened to your stock, it’s a guarantee you learnt something from it and chances are, it forms an integral part of what helped you become passionate about investing.

Take for example Warren Buffett’s first purchase.

Unlike many of us who started in our 20s or later, Buffett (unsurprisingly really) was a precocious 11-year-old and the company itself a solid natural gas company, Cities Service Preferred (aka not the early equivalent of Minecraft…). He claims he learnt to buy and hold from it. It’s a lesson he has clearly applied to investing for Berkshire Hathaway.

My own first stock was Macquarie Group, purchased at lows during the GFC and it taught me that if you know a business has solid fundamentals, you can ignore the noise. I still hold it today. I only wish all my stock choices since were as fruitful.

Given the significance of that first stock purchase, I decided to ask the professionals for theirs. After all, the lessons they learnt, they apply to the money they manage for others.

The following kindly agreed to take a trip down memory lane:

• Ben Clark, TMS Capital
• Emanuel Datt, Datt Capital
• Henry Jennings, Marcus Today
• Michael Wayne , Medallion Financial Group

They also shared what they’d buy if they were starting out today – and surprisingly, there was no double-up in responses.

The professionals share their first stocks and what they’d buy today

Ben Clark, TMS Capital

First purchase: Powerlan

Clark’s first industry purchase was in the aftermath of the dot.com boom and was a tech stock called Powerlan. It has been part of a list of ‘gems’ uncovered by an analyst employed by the firm he was working for. Its price had dropped 90% when he purchased it and it never recovered – he sold it for a loss and it eventually went broke.

What did he learn?

“Just because a stock has dropped a lot doesn’t necessarily mean it is cheap. The importance of a business being able to sustainably fund itself is underrated,” says Clark.

What would Clark buy today if he was starting out?

Aristocrat Leisure (ASX: ALL)

“They’ve got an incredibly good balance sheet and management team, they are very good at creating shareholder value and they are moving into new areas, particularly in digital that could see the earnings number accelerate. The valuation is also reasonable,” says Clark.

Emanuel Datt, Datt Capital

First purchase: a real estate development company

Datt purchased shares in an ASX listed real estate business while still a university student.

“I stumbled across the company using a stock filter which indicated this particular stock’s yield was highly compelling. A short time after investing, the company reduced its dividend and was ultimately wound up,” says Datt.

What did he learn?

“It’s important to invest in a company for its future and not to be too reliant on backward-looking financial statements,” Datt says.

What would Datt buy today if he was starting out?

“Companies in essential industries with strong cashflows, solid balance sheets and that are priced at modest earnings multiples,” says Datt.

His own children invested in a portfolio of coal companies off the back of this advice.

Henry Jennings, Marcus Today

First purchase: Silex Systems (ASX: SLX)

While Jennings had dabbled in stocks, his first major purchase was Silex Systems, which was involved in uranium enrichment and may have, in Henry’s words, “been ahead of its time” back when he purchased it. It was a speculative purchase that he spent 50c/share on and sold most of the shares at $11-$12/share, though he still holds a small amount today.

What did he learn?

“Don’t just fall in love with the stock, you need to take profits along the way and sell to the hype,” Jennings says.

He notes the uranium sector has significant secrecy around it and it takes a long time for technologies to come to fruition. Selling can be just as important as buying.

What would Jennings buy today if he was starting out?

Index ETFs or ETFs geared towards a particular sector or theme.

“Things change so rapidly today that it’s harder to pick winners. Index ETFs are the bedrock of starting out fresh today, and the low cost makes life easier for beginners too,” says Jennings.

Michael Wayne, Medallion Financial Group 

First purchase: Rio Tinto (ASX: RIO)

Wayne’s first investment was pre-GFC, when China was emerging, meaning Rio Tinto looked like an excellent investment. 

It was a wild ride, with Wayne recounting that share prices halved when the GFC hit but he later took advantage of a rights Issue that allowed investors to purchase shares at around half the market price. He doesn’t hold the stock anymore.

What did he learn?

“The worst thing you can do is panic and sell at the bottom,” says Wayne, noting that he also learnt that taking up rights Issues can pay off.

“History favours taking up those rights Issues, particularly at a discount, then exiting the position after that,” he says.

What would Wayne buy today if he was starting out?

CSL (ASX: CSL)

The much-loved Aussie healthcare titan is top of Wayne’s list – and he wishes he’d been able to buy in 30 years ago. (Don’t we all?)

“CSL ticks all the boxes and goes back to the idea of compounding over time. It has nicely compounded earnings year after year, likewise it has compounded revenue growth,” says Wayne.

The key lessons to take out from the experts

1. Take profits along the way
2. Look to the future of a company
3. Make sure a business can sustainably fund itself
4. Hold course and don’t sell at the bottom

What was your first stock? Let us know in the comments and what you learnt along the way.