QUORA: My Scariest, Riskiest ‘Investment’ that Paid Off---and that I'll Never Do Again

QUORA *: Have you ever made a very risky investment that paid off big time?

QUORA *: What was the riskiest investment you made that paid off?

I posted the following answer to both questions (click here and here):

In 1980, I bought 100 shares of Sante Fe International, an oilfield services firm, for about $28 per share. Then I got greedy. I bought 400 more shares on margin. When the stock dropped to $24, I called my broker to buy more on margin. Though he tried to discourage me, I still bought 100 more shares, for a total margin loan of nearly $14,000. That was a LOT of money for us in those days.

As it turns out, 1980 was right at the peak of the 1970s oil boom. From a peak of near $40 per barrel ($121 in today’s dollars), the price of crude oil would drop to below $10 ($25) by 1986, on its way to about $6 ($15) by the late 1990s. We were about to lose our shirts. But one Friday in 1981, the stock didn’t trade. I called my broker, whose secretary said he didn’t know anything, but an announcement was pending for the following Monday.

On Monday, the government of Kuwait announced that it was buying Sante Fe International for $52 per share. I paid off my loan, got back my initial $2800 cash investment, leaving a total profit of more than $14,000.

Phew! As it turned out, the oilfield services stocks dropped precipitously, losing most of their value in the subsequent few years. The Kuwaiti government was criticized for overpaying for Sante Fe. But they bailed us (actually, me) out of a very stupid ‘investment’ decision. That was the first and last time I ever bought stock on margin.

Related Reading:

Wall Street’s ‘Unfairness’ Shouldn’t Scare the ‘Little Guy’ Out of the Stock Market

* [Quora is a social media website founded by two former Facebook employees. According to Wikipedia:

Quora is a question-and-answer website where questions are created, answered, edited and organized by its community of users. The company was founded in June 2009, and the website was made available to the public on June 21, 2010.[3]Quora aggregates questions and answers to topics. Users can collaborate by editing questions and suggesting edits to other users' answers.[4]

You can also reply to other users’ answers.]