Growing Rich - Arabictrader.com

GROWING RICH WITH GROWTH STOCKS
with Stein and asked him why that was so. “I said, ‘Why did you keep
that whole research department when you didn’t need it?’ He replied,
‘We kept it so that if we got an idea, we could check it with them to
avoid looking foolish. It also kept us from making mistakes.’”
Papp tried to prevent the firm from making what turned out to be
a big mistake in 1973, but to no avail. “In 1972, I was bullish on the
market,” he says. “Then in March 1973, we had some questions about
credit in this country and called a policy meeting. The votes at these
meetings were almost always unanimous. I told them that even though
I had been bullish, I had changed my mind. I said, ‘The market’s down
7 percent. I would vote now to sell stocks.’ Hickey, the head of the
firm, was on vacation. I realized that if the market went down badly,
he would hang it on me, because I was bullish in 1972. So I went to
the secretary of the committee and said, ‘Here’s a summary of what
I said at the meeting, stating that I voted to sell stocks. I know you
won’t print it, but I want you to see this and write on here if you
disagree.’ He refused, but that didn’t matter. I passed out a copy of
my statement to all of the committee members, to make sure I was
on the record. I felt that strongly. I was scared of the market. I also
felt that Hickey would pin the blame on me. It’s not that I was afraid
of blame. I was more than willing to stick my neck out. But I had
changed my mind. Every so often something happens where you do
change your mind. I was also protecting myself.”
As it turned out, Papp was right. His prediction that the market
had farther to fall came true, and the firm suffered. “I remember one
three-month period in the summer of 1974 where our holdings were
down some 35 percent for the quarter,” he says. “That was horrendous.”
SHORT-TERM FOCUS
When Papp was there, Stein Roe tended to be a somewhat cyclical
and short-term-oriented operation. “I questioned Stein about that,”
Papp says. “He told me, ‘T. Rowe Price and I, Jim Stein (his name was
Sydney but he called himself Jim), had the same idea. We both felt
that buying quality growth stocks was the right way to invest. The
difference is Price went all the way and really did it. We hedged, because
we weren’t sure. So we bought the cyclicals as well as the
growth stocks. Price did it right; we didn’t. We followed chemical,
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