Reborn in America, I am a legendary short seller on Wall Street.

Chapter 198 Long-term investment, proactively buying into a trap

In the afternoon, Larry left his horse at the tavern and walked with Mr. Dunbar to the Reading Securities Company.

Larry has been thinking about the spare cash in his stock account for the past few days.

Of course, Larry wasn't the kind of client who would get itchy if he didn't trade every day. When he traded stocks, he had to be purposeful.

To date, the two biggest windfalls Larry has made are from Colt and U.S. Sugar, both of which were the result of long-term waiting and clear objectives.

Therefore, Larry doesn't want to make any trades just because he has some spare cash in his stock account.

But Larry also has his own long-term considerations for the future.

First was Paine Weber Securities, where Larry's holdings were primarily in General Electric stocks.

Larry has no intention of selling the stock when it goes public, regardless of the price, and he will hold it for as long as he can.

Larry had long planned to mortgage the rest of the money in the account in exchange for more gold coins.

Furthermore, Larry believes that if he truly learns from the experience in "The Great Madness" and is prepared to prove himself right by "shorting" at the peak of the bubble, he should wait for gold to show signs of danger before shorting silver or the stock market!
Therefore, the more than $80 in Paine Weber's own account should be left to wait for an opportunity and not be touched rashly.

But he still has $35.34 from Reading!
How to invest in this account will require some thought.

There aren't any stocks that offer particularly good opportunities right now, except for long-term investments in certain stocks.

When it comes to long-term investments, besides General Electric, the only other company Larry can think of right now is U.S. Tobacco.

According to Mr. K's feedback, the company's cigarette project is showing increasing potential for explosive growth. This positive trend in the company's operations, which only industry insiders can understand, greatly impressed Larry.

Larry doesn't know how the stock will perform in the next few years. But there's no doubt that the stock's fundamentals are undergoing a major transformation.

The most optimistic estimate is that American Tobacco Company will be able to get rid of marketing expenses this year and see a release of performance, and may even start paying dividends by the end of the year.

If this is the case, its status in the current stock market will rise rapidly, transforming it from an ordinary stock with an uncertain future into a stable dividend stock sought after by professional investors.

As a result, its stock price will also rise sharply.

Larry wasn't going to wait any longer, nor was he aiming to buy at the absolute lowest point. Instead, he decided to combine his past life's experience with value investing with a long-term investment strategy.

Initial left-side investments will inevitably result in losses, but that doesn't matter to me because I value long-term performance.

Investing in batches can maximize your chances of buying at the bottom of the US tobacco market, and that's all you need to do!

Larry came to Reading Securities today to put his first long-term investment into action.

Larry and Mr. Dunbar entered Reading's branch office. The chubby front desk manager was not at his post, but the trader who replaced him recognized Larry, a major client.

The moment the trader saw Larry, he was reminded of Larry's astonishingly brilliant move to thwart the American sugar industry.

Traders even take pride in their participation in that epic bottom-fishing operation.

"Mr. Livingston! It's a pleasure to meet you. Are you here today to make some deals?"

Larry nodded, took out his account card and handed it to the trader, then said, "I want to buy some stocks. Oh, by the way, could you find the long-term record of the price chart for American Tobacco stock? I'd like to review its historical performance."

The trader held Larry's gold-embossed account card in both hands and nodded solemnly, "Please wait a moment, your request will be fulfilled shortly!"

Larry nodded, walked to a VIP seat, took out his gold-cased pocket watch and checked the time. It was 1:35 p.m., 1 hour and 25 minutes before Thursday's market close.

There's enough time to place the order!

Larry put his pocket watch in his pocket and squinted as he began searching for the stock price of American Tobacco Company on the price chart.

When he found the stock price of American Tobacco Company, he was almost shocked. The company's stock price was now $4 and three-eighths!
This is more than double what Larry remembers when the stock price was $2.

Larry sat up straight, straining his ears to hear the price quote announced loudly as the clerk pulled out the paper tape, but he didn't hear the latest price from American Tobacco for a long time.

Shortly after, the trader returned, handed Larry's gold-embossed account card to him, and then took out a stack of transaction slips.
"Sir, this is the historical stock price trend of American Tobacco Company that you requested..."

Larry casually picked up the paper strip, but didn't have time to look at it right away. Instead, he pointed to the price chart, frowned, and said to the trader,

"Excuse me, could you please tell me why this stock is at such a high price? I previously thought it had been consolidating at a price above $2!"

The trader looked puzzled, followed Larry's finger to look at the price chart, and then exclaimed as if suddenly understanding.
"Sir, your previous impression was correct; the stock had been in the low range of $2 to $3. But for some reason, the stock started to climb in early March, from $2 and a quarter to $4 and three-eighths today, almost doubling in price!"

Larry frowned, thinking to himself, "This is bad. Someone on the inside must have also discovered that the company's business is doing well, and has started to secretly increase their stock holdings!"

If I had paid attention to this stock earlier, or even checked the stock price trend of American Tobacco more often, I might not have missed the initial upward trend!
However, after thinking about it again, Larry immediately felt relieved.

Even if I pay close attention to the fundamentals of American Tobacco, how could I possibly know the company's operating situation faster than insiders?

Moreover, considering the future performance of the stock, even if I buy it when it doubles in price, I'll still make enough to earn in the future.

It's just bad luck that I didn't buy at the bottom. But for long-term investment, once you've identified a long uphill climb and plenty of snow, who cares about the cost price!
Larry thought for a moment, then instructed, "Could you please bring me the transaction slip?"

While waiting for the trader to retrieve the transaction order, Larry kept thinking that he had originally planned to buy 20,000 shares of American Tobacco at a time, because that way he could accumulate shares by trading sideways to the maximum extent and not cause too much of a shock.

But given the current situation, Larry decided to double his investment, figuring he was investing for the long term and treating it as buying two installments today.

After the trader retrieved the trading order, Larry picked up a pen and quickly scribbled down the trading instructions on his desk.
"Buy 4 shares of American Tobacco in the price range of $4.5 to $4."

After writing it down, Larry signed his name and handed the transaction slip to the trader.

The trader picked up the order form, glanced at it, and was immediately taken aback. His voice trembled as he said, "You're planning to buy 4 shares of American Tobacco? This is a low quartile stock; the par value of each share is only $25. Buying four shares is equivalent to one common share!"

Larry nodded; he knew this basic knowledge.

Most stocks have a par value of $100, but some stocks may have this situation because they are afraid that the price will be too high and no one will buy them, or because they keep splitting their shares.

For example, with American Tobacco, four of its shares are equivalent to one share of common stock, but this kind of stock split doesn't matter to Larry. He's aiming for long-term holding anyway, and these lower quartile or lower half-quartile stocks are actually easier to accumulate because of their large number of shares.

Larry remembered a company on the NYSE called Anaconda, which was also a low quartile stock.

“Yes, I’m sure I want to buy 4 shares. Go ahead and buy them!” Larry instructed.

Without further hesitation, the trader went into the telegraph room and began placing orders according to Larry's instructions.

Larry stood there, flipping through the pages of American Tobacco's stock chart, instantly entering a state of flow where time seemed to fly by as if it didn't exist.
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Mr. Dunbar remained seated on the chair by the front door, seemingly relaxed with his legs crossed, but his eyes were always fixed on Larry.

Mr. Dunbar actually greatly admired this young employer. Putting aside his wealth, Mr. Dunbar found Larry's dedication to his work to be truly commendable.

The key point is that this person possesses so much wealth yet remains unassuming, and doesn't exhibit the impetuousness and frivolity typical of nouveau riche, which is quite rare.

Mr. Dunbar is now willing to follow Larry, work as his bodyguard, and even buy him horses.

On the one hand, Larry was very respectful to me, generous, and kind. He never acted like an employer and was really like my nephew.
On the other hand, Dunbar could easily sense Larry's extraordinary personal charm and outstanding talent, which gave Dunbar a very interesting obsession.

That means staying close to Larry and seeing just how high a position such an outstanding person as him can reach.

At this moment, seeing Larry's focused expression, Dunbar's respect and curiosity grew even stronger.
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As Larry scrolled through the stock price charts, he silently memorized the recent stock price movements of American Tobacco.

After reviewing the thick stack of stock price charts, Larry came to the conclusion that while there was indeed continuous buying of the stock, the buying momentum wasn't very strong.

It's probably just preliminary groundwork, or a long-term accumulation of stock.

Regardless of who bought the stock, it's definitely not time for a significant price surge yet. Starting to buy in batches now is certainly not too late; it's just that the cost price is slightly higher.

Larry even secretly hoped that the stock would drop, so he could buy more shares at a lower price!
Whatever, let it be!

Larry chuckled and sighed softly, snapping out of his state of flow and realizing with a start that the Reading trader had been standing beside him for quite some time.

The trader looked Larry in the eye, smiled, and said, "Sir, I noticed you were thinking, so I didn't disturb you... This is your trade confirmation."

Larry nodded and took the transaction report, raising his eyebrows. He thought to himself that he had been so engrossed in studying the stock price of American Tobacco that at least 45 minutes had passed.

Otherwise, it would be impossible to receive a transaction confirmation slip from everyone.

Larry took out his pocket watch and saw that time was passing faster than he had imagined; it was already 3:15 p.m., long past closing time.

"Oh, I was so focused..."

Larry gave a wry smile, looked down at his transaction report, and saw that all 4 buy orders had been executed.

The majority of American tobacco products sold for $4, with a small portion selling for $4. The total cost was approximately $4.3.

After reviewing the report, Larry smiled, flicked the paper, and said to the trader,

"Alright, this price is good! I'll buy more after a while!"
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One hour later, in New York.

James Keane sat in his fourth-floor office, smoking a pipe and enjoying the view below.

This has been his long-standing habit: after each trading day, he would spend some time alone reflecting on the day's trades.

Today is no exception.

Just as Mr. Keane was finishing his pipe, there was a knock on the office door.

"Please come in!" Mr. Keane turned his chair around, pipe in one hand, and turned his attention to the doorway.

The newcomer was his trader, Quincy with a slicked-back hairstyle. Quincy was all smiles, his hand resting on the belt of his overalls, looking relaxed and happy.

“Mr. Keane, I’m here! I have important news to tell you! Didn’t you tell me to keep an eye on that kid named Larry Livingston? The one from Reading Corporation…”

Mr. Keane nodded, interrupting him, and said,

"I remember him, you don't need to introduce him again. Just say what you have to say!"

Quincy, with his slicked-back hair, nodded and continued, "Sir, according to my friend, he's already started buying! He bought 4 shares of American Tobacco this afternoon!"

Keane raised an eyebrow, took off his pipe, frowned slightly as he recalled the recent trends in American tobacco, then turned to Quincy and said,
"Hmm, this stock has recently seen a surge. However, the increase is nearly 100%, and the profits are already substantial... Since he bought in, Quincy, go check the stock's fundamentals for me. If there's no special information about dividends or other payouts, hmph, I think this stock has probably peaked!"

Quincy quickly agreed, "Okay, boss, I'll go confirm it for you right away."

After Quincy left the office, James Keane tossed his pipe onto his desk with satisfaction and went over to double-check the data strip.

After watching for a while, Mr. Keane smiled. If this kid bought in the afternoon, then his cost price should be around $4.25.

If there is no concrete positive news for the stock, Mr. Keane decided to slowly drive down the price so that the other party would buy more shares to cover their margin.

Once this kid has invested heavily, I'll dump another sum on him and make sure he goes bankrupt!
Thinking of this, Mr. Keane smiled, gazing at the setting sun outside the window, and silently said to himself,
"This kind of person will become my rival sooner or later. I've said it before, I won't allow such a potential rival to exist!!"

　Note: There was a bug when I wrote about US stock prices before. Before 2000, the fractional prices in the US were multiples of one-quarter, one-eighth, etc. The smallest was one-eighth.

　　(This custom originated from the early days when traders traded under sycamore trees. They used gold or silver coins, but had very few subsidiary coins, so they would cut a silver coin into half, a quarter, or an eighth of it.)

　　From now on, prices will be quoted according to this pattern, and prices that defy common sense, such as $4.4, will no longer appear.

　　Of course, the cost price may have other figures.

　　In addition, the previous ones will not be changed, as the workload is too large.

　　Thank you for your understanding. I wish you all prosperity.

　　
　
(End of this chapter)