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Determan studies annual reports and other documents before taking the plunge, but if he has any remaining questions, he simply calls the company president. That opportunity, he points out, is one of the lesser-noted benefits of investing in small ventures. When he became concerned about an earnings downturn at Innovative Software, Determan called the chief financial officer there, who reassured the investor that the profit slump was "just a glitch." So Determan held on to the stock, which proceeded to zoom from about 10 last November to 22 now, even after a 3-for-2 split.
In line with Determan's principle, many private investors like to put their money into ventures they understand or industries in which they have unusual chances to spot a breakthrough product. Says Hugo Quackenbush, senior vice president of the Charles Schwab discount-brokerage firm: "Airline pilots, for example, may know some kind of gadget that is being made by a company that may escape the attention of the big guys on Wall Street."
Some investors succeed by shunning glamour. Russell Faucett, a Los Angeles financial adviser who spends about half his time managing his personal portfolio, looks for solid, small Rust Belt companies with lackluster earnings and low profiles. Says he: "Well, my stocks are kind of boring actually, and of course they are of no interest to the big investment firms, because the brokers can't tell a good story about them to their clients."
The stock-picking bug has even bitten people who would ordinarily take no pleasure in studying price-earnings ratios and balance sheets. "It's so simple, it's insane. If you do this carefully, it's like picking money off trees," declares Michael Petryni, a Los Angeles screenwriter, sounding more like a TV pitchman. But behind the scenes, Petryni spends at least two hours a day studying financial papers like Investor's Daily and following stock quotes using the same computer terminal on which he writes his scripts.
Many investors are surprisingly daring at an early stage. Fairfax Randall, a Houston homemaker and sometime interior decorator, boosted her portfolio from $250,000 to $2 million in just three years by leveraging, or borrowing money to increase her stock-market wagers. But she ventured naively into risky stock options and lost $1.5 million during the 1981-82 recession. Then, through cautious decisions and hard work, she built her portfolio back to $2 million. Says she: "The stock market is my absolute love. I don't buy pretty clothes, and I never spend much money on myself. I put it all in the market."
Not everyone is willing to risk such setbacks, especially if the savings in question are earmarked for retirement or education. J.H. Freeman, a 70-year- old former financial manager of a Houston law firm, is primarily interested in steady-dividend income rather than a zooming but precarious stock price. Thus he prefers companies with reliable profits, like power utilities. Though his taste is conservative, Freeman has doubled the value of his portfolio in five years.