From Baseball Cards To Breakouts
A man with a keen business sense, Tim Truebenbach has been trading his whole life. He started out trading baseball cards at school with other kids and turned that into a profitable business. The proceeds from that first endeavor gave him his start trading stocks. But the lessons he learned from those earliest trades still apply.
(Note: As I spoke with Tim on the phone from his office in Portland, Oregon, he received a delivery of baseball cards).
Marc Dupee: Do you still trade baseball cards?
Tim Truebenbach: Well, my parents have recently made me move them out of their garage. I have 40,000 to 100,000.
Marc: 40,000 to 100,000!?!
Tim: I was pretty into them as a kid. I’d buy cases of 10,800 cards. On average, I used to get 10 of those a month, so that’d be a little over 100,000. I’d sell nine cases, and that would usually give me all of my money back, plus a little bit of profit, plus I’d still have one case to hold onto for the future. So, over the past year-and-a-half, I’ve just been slowly pitching out these excess cases because they haven’t gone anywhere in 10 years. I have a lot of cards in my personal collection that have gone somewhere, like Ken Griffey, Jr.
Marc: How old were you when you started collecting baseball cards?
Tim: Probably about 12. I think I got my business license when I was about 14.
Marc: How did you used to sell them back then?
Tim: It started with me just selling them to the kids in my class. Then I started doing sports card shows. You’d rent a table for $35 to $100 for a day or two at a sports card convention. Then I got on this thing called Sports Net. It was an Internet-based thing where you logged in and pay a subscription fee.
Marc: They had the Net back then?
Tim: It wasn’t the Internet. But it was somewhat similar where you dialed in. It was like eBay, actually. No bidding, though. You’d just post a price and someone would ding it and it would disappear for sale, and you would do the transaction. And I got a little network going with people I started doing business with more frequently. And then, rather than posting stuff, I’d be able to move stuff pretty quickly.
Marc: So you actually started out by being a market maker in baseball cards?
Tim: I did! It was pretty cool. I was doing some pretty good size all across the West Coast.
Marc: And now are you planning to unload your 40- to 100,000-lot baseball card position over eBay?
Tim: Yes, eBay is usually the place I’ll do it.
Marc: Tim, you did accounting at the University of San Diego, the same place I did graduate studies in International Business. Did you ever take an investing course there?
Tim: Yes, but it was mostly just definitions. It didn’t really tell you how to make money. There were a lot of references to P/E ratios. They seemed to only be teaching a very small part of the picture of the value game. Unless you know the whole picture of the company and its valuation, you can get pretty badly hurt. So after the first day, I walked out of there and went in to try and learn something about real estate in Revitti’s class.
Marc: Oh, you took Dan Revitti for real estate, too, then?
Tim: Yes, I wanted to get in something that could have taught me something and the real estate helped. Revitti was a fun guy to have teach a class.
Marc: Then how did you actually get started in trading?
Tim: Through economics class in high school. I wound up getting involved in the stock market through the class. I was playing the market hypothetically, on paper. Since I was involved in tennis — you know, at a higher level, traveling around the country a lot to play tournaments. I wasn’t in class and my grades had suffered. So I wanted to earn some extra credit and proposed to the teacher that I use some real money from the gains that I had made in the business that I had in baseball cards trading. He allowed me to do that and said that every dollar that I made would count as one point of extra credit. And I agreed to donate the dollars that I made to charity. I wasn’t thinking that it would be hard or easy to make money in the markets, however.
As it turns out, it worked out all right and I got affiliated with somebody that my family knew and invested in put options in the OEX back in 1990 when things weren’t so good, made some money, got an A+ in the class and donated some money to charity. Unfortunately, that was one of the worst things that I could ever have had happen to me.
Marc: Why?
Tim: Basically by having money come at me that easy out of the stock market and making me think it was easy. So following that for the next four years I read books and magazines, followed hot tips, and just lost money slowly over four years. Slowly because I’m a conservative person, otherwise it would probably have happened a lot quicker. Finally in 1994, I interned during the six weeks we had over Christmas break between semesters at Dean Witter. A friend of mine who is a broker there mentioned to me to read William O’Neil’s book, How To Make Money In Stocks. And I read it. It made a lot of sense, and I started applying it in December of 1994. And literally, after having lost money for the past four years, I was able to make, like, 15% just following it real roughly in December of ’94. And then moving forward with the same strategy, obviously being motivated by it, I’ve been refining it and working toward making it perfect, and finding out where my errors lie. And this is what I’m still doing.
Marc: Have you modified it much?
Tim: No. Everyone makes their own errors. So it becomes a matter of fixing your errors. Everyone starts out with the seven same basic rules: CANSLIM. And then they basically just go on their own path from there and make their own mistakes. One thing I know that the book doesn’t touch on much is money management. I think that is something that people approach differently. You can talk to two guys about the same stock and one guy made 100% and the next one makes 500%.
Marc: In money management, you’re talking about more than the “cut losses at seven or eight percent” and are referring to tactics to add to positions, pyramid, and go on margin?
Tim: Exactly. When you’re going to buy. Or when you’re coming out of a bear market like we’ve just seen end right here, in April 2001, how heavy are you going to step in when you think the bear market is over. Obviously, we’ve had three or four failed confirmations (or follow-through days since last year). I remember I stepped into a few of them like TransSwitch (TXCC) in September that hurt me. But it hurt me a lot less than some other people who might have jumped in on margin right away on that. Those types of things are different for everybody, even if they are all following the same strategy.
Marc: How did you develop your money-management strategies? They’re more yours than O’Neil’s.
Tim: Yes. I think one of the thing he mentions right off the bat is that if you have $5,000 to invest, use one or two stocks. And if you get up to $100,000, the suggestion is five stocks. My biggest problem over the years has been selling wrong. Taking a 7% or 8% loss when I’m wrong, that’s easy. I don’t have a problem doing that. But selling at the wrong time is more problematic. A stock peaks, then starts coming down and I haven’t gotten out of it yet, or I’ll sell too early on the way up and maximize the gain. That’s been more of what I’ve worked on. I think the selling is one of the things that everybody has to work out a method that works for them and pick the rules to sell that meet their criteria the best.
Marc: Everybody bitches about that. What are your rules for maximizing your profit?
Tim: Well, I’ve literally tried to look back on all of my trades and find out what sell rules I could pick out that would have covered me in the majority of situations. I think it is virtually impossible to find rules to cover everything. But number one is I’ll cut a loss at 7%. Secondly, I’ll look at a stock moving on heavy volume without increasing in price over two or more days. Literally just starting to churn itself after a good move. Volume would exceed 50% of its (50-day) average volume. Basically, you’re looking for the same criteria as when it breaks out. However, I won’t sell on that if the stock is up 20% or more in less than eight weeks because there is the possibility that a stock will churn itself a little and come back 5% to 10% before it can move higher. Here, I’ll exit if it goes back to breakeven.
Marc: Do you think that your baseball card trading is in any way similar to stock trading?
Tim: I do. Before the baseball cards, I also had a paper route, and I’ve kind of been around business my whole life. My Dad has been in business. I’d say the similarity is money management. Money management and taking care of your capital is absolutely one of the most important things in any type of business activity that you do. And that is probably what I learned the most from baseball cards. You know, you can’t spread yourself out too thin so that when you do get something hot you don’t have enough of it to make any money. But at the same time, you don’t want to put all your eggs in one basket. I would say pick your time and pick how much cash you are going to put into a stock. Sometimes just splitting up your basket a little bit would include putting some money into a stock and then leaving some in cash and making that stock prove itself to you a little bit. But definitely money management has been what has helped me the most.
Marc: I guess the liquidity of baseball cards is not analogous to most stocks?
Tim: It’s actually pretty similar. The similarity, I think, is derived from human emotion. It’s the same thing. You’ve got supply and demand. And the same thing with stocks. With stocks, you’re buying a certificate. As a common share holder, we’ve basically got no claim to the company, especially with growth stocks. So you have the equivalent to baseball cards: a piece of cardboard with a picture on it. How much is that worth? I think a stock certificate might be more after a recession!
Marc: So what do you do in your off time?
Tim: In the off time, besides the stock market, I’m married, so I’ve got a house to work around. I spend time with my wife, but I’m pretty active. I play tennis still, snow ski, water ski. Mainly just sports. It tends to be where if the market is good or things are going well, I’ll be much more active as far as going out — doing some skiing or boating or tennis, just basically staying real active. Whereas if things are slow and there is just not much to do, than you end up lounging a lot more or just doing what ever else.
Marc: How do you keep psychologically balanced through the both bull and bear market cycles?
Tim: Well, in maintaining confidence, it’s probably more or less finding something that really works for you. Just having the confidence and discipline to follow something and believe that it is really going to work. When it is not working, you know that it will. It’ll even itself out over time. At the same time, if it really starts working well…I’ve seen both cycles where you make a ton of money and times like last year where you can’t make money no matter what you do. So you’ve got to not lose it. When you’re making a ton of money, you’ve got to know how much you can really make before it just starts getting ridiculous. I don’t know any other way to put it really. The biggest example is spotting the high in Qualcomm (QCOM) when I had it. I woke up one morning around the end of ’99 and it was up a hundred bucks. I had a good position because I had just worked my way into it good throughout the year. Up $100 is just great, amazing. All I could do was just sit there with huge eyes. I called my friend, I had to share it with him because we had been following it together, and he was the same as me, just as excited. But at the same time, I listened to him on the other end and how excited he was and I realized that this was the top. And it literally was the top. And by the time he finished being excited, I was out of the stock completely.
So it’s that kind of thing and just recognizing yourself and how you are going to apply your theories. And that was before I had a strict set of sell rules.
Marc: I’m curious, that stock was still going up and you were able to exit on the way going up then?
Tim: That execution, getting out, there is no stock that I’ve played better than Qualcomm. Being in San Diego may have been part of it and just literally having that person on the other line being so excited. I heard him saying maybe we should buy some more, and I’m thinking, “that’s out of the question” because here’s a stock up $100, and you’re talking about buying some more. There were also some lessons I had learned from a person I had traded with in the past, he’s a phenomenal day trader, some of those had come out and I just wound up playing it right.
Marc: What about your fund?
Tim: The fund emphasizes what I do, O’Neil’s investment philosophy. It incorporates my form of money management, which has allowed me to preserve capital through years, like last year where I ended up with a small return for the year. It’s targeted for people who believe in the system and the growth model, but don’t have time to follow it, learn it, or implement it themselves.
The reason I’m definitely here talking about this stuff and writing the column on TradingMarkets is for people who do follow it. I’d encourage both. But if someone doesn’t have 100% time to commit to something like this or go through the charts every single night or follow things, then they should look at having their money managed by somebody. That’s what my fund is for. But at the same time, if you have the time, you can make some money. Probably right off the bat you could wind up making the same money over the year that I’m making.
Marc: Tim, any final words?
Tim: The money is made by you and your patience, and waiting and the sitting. It’s not by doing something.