Stephen Bland revisits the first investment he ever made.
I think I was nineteen or so. A student chartered accountant or articled clerk as they used to call us in those days. The employers, firms of chartered accountants to whom one had to be articled for a period of several years in order to qualify, paid a pittance, way below any kind of reasonable wage at the time. I think I started off on seven quid a week which was rubbish even then.
I found out that was riches though compared with a guy I once met from Bristol who was earning just three pounds a week. I thought it odd that he wasn't, as I was, seething with resentment at this system but then I was always a bolshie type.
It may seem incredible these days, but actually getting paid at all was a big improvement because some years earlier, articled clerks had actually to pay their employer for the privilege of working for them. The effect was that only wealthier people whose parents were willing to pay the premium and maintain them could afford to enter the profession at all. I well recall one partner at my firm telling me that he was forever grateful to the firm where he qualified because they'd let him work there for five years for nothing because at the time everyone else demanded a premium.
Discovering the stock market
Whilst on my seven quid a week, I had become interested in the stock market. As far as I remember it started when I noticed a couple of the older articled clerks reading the FT and discussing shares. I got interested and my practice whenever I get interested in anything is to immerse myself in it very quickly because I want to discover everything I can find out about it. But more than that I want to learn only from knowledgeable people, not from dilettantes.
My problem though was that I had no money. I didn't come from a wealthy background. But I'd become friendly with a fellow articled clerk at the firm about the same age as me who did have money. Real money, one of those old English families with the big country house, the place in town, the accent to go with it, the works.
I'll call him Michael and I liked the guy. Despite our radically different backgrounds we got on well. He had it all it seemed but one of his traits was that he was awkward with women and wished he wasn't. Not gay, he just had difficulty in talking to and scoring them. I tried to fix him up with a secretary there but it never went anywhere so I took her out instead, discovering that he hadn't missed much anyway.
Michael was a gambler. Horses, shares, whatever. But like most gamblers he wasn't any good at it and lost heavily overall. I recall once that he'd put a big bet on a horse in one of the major races of the year and we rushed out to his car parked outside the office to listen to it on the radio because it was far more than his usual stake. He lost, a sum many times my weekly wage. The car was good though, a magnificent dark green Jaguar XK140 sports car of which I could only dream of owning, all leather and walnut inside.
Having learned something about the market, I'd found a share called English China Clays. It doesn't exist any more but at the time it was quite a big company as far as I recall. Some sort of miner, not that this mattered. What did matter were the numbers. I figured that it was too cheap and that the results due out very shortly would probably make it look even cheaper and were likely to drive up the price. Remember that information in those pre internet days was nowhere near as accessible and widely disseminated as now.
No money and no broker
But not only did I have no money, I had no stockbroker. No internet back then, no cheap nominee online brokers. You had to have the traditional stockbroker or nothing. But Michael of course had both money and a family broker. So I put the deal to him. You put up the money for a very short-term trade to be sold immediately after the results come out and if it wins we split the profits 50/50. If it loses you take the hit. So whatever happened I couldn't lose, only he could.
Very one sided of course but he knew I was skint. Flatteringly though he trusted my judgement which could hardly be worse than his own as he had lost money repeatedly in shares. So he went ahead and bought English China Clays a few days before the results. I forget now how much was involved but it must have been a goodly chunk of money by the standards of the time, certainly amounting to several years worth of my salary.
I was probably rather nervous in those few days leading up to the results announcement. Although I wouldn't lose any cash if the deal went wrong, it would be very embarrassing and could lead to the loss of my friendship with Michael even though he was fully aware of the risks.
Result!
On the day of the announcement we rushed out in the lunch break to buy the midday Evening Standard which was then our only way of obtaining share prices. Michael opened the paper to the city pages and I had done it. English China Clays had taken off seriously on the results and we had made a big score.
Sell now! I screamed at him pushing him towards a phone box. But he told me that, unknown to me, he had given a stop loss/profit instruction to his broker upon purchasing, thereby limiting the actual loss he could make and similarly the profit. The shares having well smashed the stop in the uptrend were already sold. Nevertheless a nice profit remained, if somewhat less than I first expected, but I understood his caution. Who was I after all that he should stake me in the way he did?
It didn't dampen our high though. Our office was near the Victoria area of London and we whooped around there laughing and joking for the remainder of the lunch break, full of ourselves. Later, Michael gave me a fat cheque for my half of the deal and I never looked back. I got me a broker and did my own trades from then on.
Going solo
My strategy was still fairly nascent though and I was still more of a gambler, some way from the fully fledged value artist I was to become. Not long after I made the big mistake of following a tip in the paper on a very small cap asbestos mine in what was Rhodesia. Seems laughable today that anyone would bet on that mineral in that country but neither carried the opprobrium they do now.
I lost quite a bit on that trade but I learned to ignore such tips. There was far less of the regulation we see these days and I discovered that such small cap tips were frequently dodgy, placed in a secret deal between existing shareholders and unscrupulous journalists to encourage mugs like me to buy and enable others to profit.
English China Clays was my first trade and although I was convinced it would work, it was of course a risk as are all shares. I've wondered what would have happened had it gone wrong. Not just because of Michael with whom I've long since lost touch but whether it would have put me off the stock market altogether. Although I like risk, I am not a dumb gambler. I think I know myself and will not continue with risk situations past the point where I realise that am no good at it. And a first trade going very wrong could have been my last.
I'd like to wish all my readers a prosperous New Year.
More from Stephen Bland:
