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His first stock cost under $5
Ray Dalio mowed lawns, shoveled driveways, and caddied. Golfers talked about the markets all the time then, when even a barber would tell you what stocks to buy, and he put his caddying money into one. He believed that buying more shares of a cheap stock would make more money if it went up.
The company was about to go bankrupt. Another company acquired it, and the price tripled. He liked the game, and he figured it must be an easy one: the Wall Street Journal listed thousands of stocks, so he only needed to pick one or two that went up.
Then he realized it wasn't easy, and by then he was hooked. He taught himself from Fortune magazine's Fortune 500 issue, which offered little tear sheets for annual reports. He checked off every one, mailed it in, and the reports arrived at the house until they became his little library. No other kids he knew were doing it.
Why does a low share price mislead?
A share price alone says nothing about what a company is worth. A company's total value is the share price multiplied by the number of shares outstanding. A stock priced at a few dollars can be far more valuable than one priced at hundreds if the first company has vastly more shares.
How can a struggling company's stock triple?
When a company is near bankruptcy its stock price is already very low, so a modest buyout offer can be a large percentage gain. Acquirers usually pay a premium over the trading price, and studies of mergers have found premiums commonly in the range of 20 to 40 percent. A tripling is much rarer and typically happens when the stock was priced close to nothing.
What was the Fortune 500?
Fortune magazine published its first Fortune 500 list in 1955, ranking American companies by annual revenue. The magazine's yearly issue gave readers a window into the largest businesses in the country. Mail-in cards for annual reports were a common way for the public to obtain company financials before the internet.
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