How You Can Get Rich With 4 Dumb Mistakes

It's true. I've been with The Motley Fool since 1995, and I'm closing in on a whopping 10,000 articles. As a limb-venturing analyst, I take big swings from time to time. I sometimes whiff badly.

Tastes like crow
Here are some of my more regrettable calls over the years:

• "If history is any teacher, the stock hasn't spent too much time looking back," I wrote about Krispy Kreme (NYSE: KKD) six years ago, going over its scorching run since its IPO three years earlier. I praised its "proven recession-resistant growth" and somehow tagged doughnut-loving Homer Simpson as a greater investor than Warren Buffett or Peter Lynch.
• "Some folks go for tattoos, piercings, or eclectic haircuts to stand out from the crowd," I wrote last year in a bullish piece on Blockbuster (NYSE: BBI). "I can do it in just four words: I believe in Blockbuster."
• "An improving economy may reward investors sooner rather than later," I wrote in singling out timeshare operator ILX Resorts as one of my favorite stocks under $10 in 2004. Healthy earnings and a 5.2% yield seemed steady, even as hospitality heavies Hilton and Marriott (NYSE: MAR) were muscling in on the space of the nimbler ILX, Sunterra, and Bluegreen (NYSE: BXG).
• "Something special is happening at Six Flags," I wrote in March 2006, weeks after the amusement-park operator's stock hit double digits for the first time in more than three years. Special? The regional chain filed for bankruptcy reorganization this year. It's a hard industry these days, but regional rival Cedar Fair (NYSE: FUN) is humming along profitably as Blackstrone Group (NYSE: BX) continues to snap up theme parks.

All four of these stocks are trading markedly lower today.

Source: Yahoo! Finance.

I can't run away from my mistakes. Even watching Jones Soda and Jamba rally sharply off their lows this year doesn't make the sting go away. I went out on limbs, and the branches cracked.

Humble pie with a cherry on top
If this self-effacing excursion feels like a ridiculously circuitous route toward a back-pat, you're right. I'm willing to own up to my blunders -- and relish them, actually -- because there's a secret to getting over the misses: the long ball.

Baseball purists know that Hank Aaron hit 755 homers in his 23-season career. Few will tell you that he also struck out 1,383 times. He failed more often than not in touching all the bases. Do fans care? No. In one powerful swing, Aaron could change the course of a ball game.

Investing is the same way. It's not about the misses. It's about the slugging percentages.

"Robotic arms in the operating room? Yep. It's really happening," I wrote summer of 2005, singling out Intuitive Surgical (Nasdaq: ISRG) as one of four stocks that could double again.

"The biggest testimonial for the company's surgical-room breakthrough is that recurring revenues have gone from a third of the company's sales mix three years ago to half of total revenues today. This isn't just a more dependable source of income. It also means that hospitals, surgeons, and patients are turning to the robotic arms more often."

The stock closed at $49.73 that day. It had been recommended to Motley Fool Rule Breakers newsletter service subscribers at an even lower entry point earlier in the year.

The stock closed at $260.47 yesterday, as my opinion of surgical automatons growing in popularity has crystallized over the years.

A 424% return on the stock over the past four years is more than just a big number. In other words, even if Krispy Kreme, Blockbuster, ILX Resorts, and Six Flags went to zero, a similar investment made in Intuitive Surgical at the time would still be profitable today.

If you're sharp enough to snag a five-bagger, it gives you the flexibility to strike out four other times.

Just keep swinging
This isn't lip service. I have publicly owned Netflix since October 2002, with a split-adjusted cost basis in the low single digits. It has been a 10-bagger for me. If I feared competition, I could have invested in the now-bankrupt Hollywood Entertainment and Movie Gallery chains -- several times over -- and still be ahead.

Our Rule Breakers scorecard is smoking the market by an average of 19 percentage points per recommendation, because we're able to hit it out of the park from time to time. A fistful of winners can be more powerful than a bucketful of losers.

So bring on my next mistake. And the one after that. You don't have to get it right every time. All you have to do is make sure that when you're right, you're really right.

© 2009 UCLICK, L.L.C.