Maybe. Or maybe I had a good plan, made calculated investment decisions based on prior research and obtained the desired result. I bought NOVN about a year ago at about 12 and sold all my shares on Friday half at 22 and half at 24, for a 92 percent gain. I’ve made lots of stupid investment decisions (notably buying CISCO near the top based solely on all the enthusiasm and without doing my homework), but this investment – my best ever – was deliberate (I think I first saw NOVN recommended at Motley Fools, but I then did my research).
You said I shouldn’t have bought NOVN because it’s a small volatile stock. That’s exactly why I bought it. I’ve got shares of HonHai, which is a good company, but its shares are trading at about 150. Because the stock is so costly it will have to go up a LOT in order to amount to a nice percentage gain. On the other hand, a cheap stock needn’t rise so much to gain a good percentage. Because NOVN was trading at 12, a gain of 6 would be a 50% gain. That seemed plausible although it would be extremely unlikely with a costly stock such as HonHai. Based on its past price, though, I was shooting for a 100% gain.
Moreover, NOVN is in the medical product industry, a profitable industry. And as you pointed out, it is a volatile stock (news could result in sudden large changes in price). I know past performance is no guarantee of future performance, but I like looking at past charts. I noticed that NOVN traded at about 10 until year 2000, when it shot up above 20, then back to 10, then up to 60, down to 30, up to 40, etc.
I didn’t know what NOVN was worth, but I did know it had bounced up and down a lot (some stocks don’t – some are more restrained and that’s not what I wanted). So I decided to buy after a downward plunge and sell after it bounced back. My opportunity came when a study was published possibly linking cancer to hormonal supplement treatment for women. I figured it’s just one study maybe wrong and NOVN makes various other products. They’ve got a whole system set up for manufacturing, marketing, distributing pharmaceutical transdermal patches. If one product doesn’t work they’re all set to focus on others. So I bought within a day or two of that bad news, when the stock was in a trough.
Ever since then it’s been steadily rising, as people forget about that old report and get excited again about this exciting company that has already demonstrated its potential. I was a little nervous a couple of weeks ago as it dipped a bit, but on Friday they announced good news, it gained over 20 percent in one day and I sold.
Sure there was some luck involved, but there’s a saying that “luck is when preparation meets opportunity.” I prepared for the opportunity in this case. I can’t guarantee my next pick will be so successful, but I’ve definitely learned that the biggest mistake one can make in investing is to simply buy crap based on all the hype. Make sure you know what you are buying, do your research in advance and don’t believe everything you read (most advice regarding specific investments is outdated and/or biased).