Always Keeping An Ear To The GroundElizabeth Roberts
In 1989, Pat Blanco walked into an Office Depot in Miami to buy photocopy paper and immediately recognized the appeal of the store. The selection of merchandise was far better than what she had seen at other office-supply stores, and so were the prices. A few more visits to the store and a trip to the public library to read up on the company convinced her that Office Depot was a winner. In August, 1990, she bought 200 shares at $14 each. After a two-for-one stock split, she bought an additional 100 shares, and now her total investment is worth nearly $18,000.
Office Depot Inc. is just one of a dozen stocks in Blanco's self-managed individual retirement account. By her own reckoning, the account earned a 55% return for the three years ending Dec. 31. That comes to 15.7% a year, vs. 10.8% for the Standard & Poor's 500-stock index and 8.9% for the average equity mutual fund. In fact, it was a bad experience with a mutual fund that made her take charge of her own investments. Says Blanco: "If anybody is going to lose my money, it's going to be me."
Despite some snappy returns, Blanco is no financial whiz. Nor does she have any formal training in the subject. The Miami resident is a registered nurse with a master's degree in public health who runs her own consulting firm, Healthcare Risk Control. And as the mother of a 13-year-old son and 7-year-old daughter, she has little time to track down investment ideas through data bases or research reports. So her ideas come largely from day-to-day encounters, such as Office Depot and Walt Disney Co., from watching Wall Street Week or The Nightly Business Report, or through business contacts.
Of course, these casual observations are just a starting point. Blanco next checks the Value Line Investment Survey, which includes data and ratings on 1,700 companies. What she's looking for is a red flag. "If Value Line says a stock is a bad idea, I don't buy it," says Blanco.
DOCTORS' ADVICE. Blanco also leverages her work time into investment time. She often visits with doctors, helping them to reduce their liability risks and insurance costs. "If I hear that a company is producing a good drug for cancer, when I'm in an oncologist's office, I ask, `What do you think about drug XYZ?"' says Blanco. "If he says he has used it and is getting good results, I'll consider it. [This research] is not very scientific, but it works for me."
Playing on her professional expertise, Blanco invested in HealthInfusion Inc., which provides in-home care to the infirm. She had worked for its managers in an earlier venture and thought highly of them. Besides, she adds, "home care is the future of health care." Her investment is down by one-third, but she's holding on. In addition, she thinks the company is a takeover candidate.
Is that an inside tip? Nah. From reading the business section of her local newspaper, Blanco learned that W.R. Grace & Co. had agreed to acquire Home Intensive Care Inc., a competitor. You don't have to be an investment banker to know that makes HealthInfusion a potential takeover as well. You only have to be an astute investor.