You Do Not Need 20-30 Stocks To Make a Living

How many stocks do you need to make a good, great, or fantastic return? When I was a broker with Merrill Lynch one of my clients taught me that you do not need to be chasing the next best thing but rather stick with what you know.
He told me that when WWII was over and that he was discharged he had about $2,000. And someone told him a similar story. You see his name was Walter Morris a lumberman in Arkansas and when he was discharged he went to work for the family lumber business and invested his wartime savings in three stocks in equal amounts. The first was Singer, you know then as the sewing machine company, but Walter knew them as the manufacturer of his rifle that he carried for 3 years and the maker of the Jeep that he drove for his superior officer. He felt that he knew something about Singer and felt it was a great investment. The second company Walter invested was IBM or International Business Machines. This company saw the future in hand cranked adding machines and how easy they made life for the bookkeeper. The last company that Walter invested in was GM or General Motors. He figured that every GI coming back from the war would buy a new car, want a house, and have anything that would make life easier. Walter tells me that over the years GM, IBM and Singer ran up split again and again in fact so many times that he lost count. He knew that after a split it would usually drop to the lows for the year, so he sold it on the news of a split and bot it 2 months after. I had several conversations with Walter about his strategy in the early 1980’s and when I wanted to test my chart reading abilities on those three I would call Walter and ask him what he thought. He was never wrong! Walter had amassed about $3,000,000 in just three companies from sometime in 1944 to 1982
The moral of the story is knowing a couple of companies very well and trade what you know. Stay away from the daily noise.