Wednesday, October 11, 2006

The Don Factor

  • Lucent stock increased 613% from 1997 to 2000 and then dropped 99% from 2000 to 2002
  • Lockheed stock dropped 71% from 1997 to 2000 andthen grew 412% from 2000 to 2002

There is clearly a turning point for both companies at January of 2000. What happened at that point in time?

In January of 2000, Don moved from Lucent to Lockheed.

The impact shook Wall Street.

Lucent's astronomical growth turned into a nosedive.

Lockheed's floundering was reversed and the stock took off like an F-16.

This suggests a new investment approach:

Invest in the company where Don works.

  • If you invested $1000 in Lucent when Don worked there, and then moved the money to Lockheed when Don moved, in six years, your $1000 investment would have grown to $26,230.
  • If you invested $1000 in Lockheed when Don worked at Lucent and then moved the money to Lucent when Don moved to Lockheed, your $1000 investment would have shrunk to $3.62 by the end of 2002.

Don’s total impact on the market accounts for $233 billion in market movement.

Conclusion: Don is underpaid.


Dewey said...

your only underpaid if you don't invest in yourself

Don Dodson said...

I hold very little Lockheed stock. In general, it is very risky to own too much stock in the company you work for. Diversification demands that you not be dependant on the same company for both your current income and future financial security. You might find yourself unemployeed and broke all at once. Just ask former Enron employees about that. They thought that Enron was a great investment right up until the day that it collapsed.