How My Dad Lost Out on Millions Because of Bad Advice

February 2, 2018

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Growing up, I watched my Dad dabble in the stock market. I didn’t always understand all of his picks since he mainly bought tech companies. He was working at Cisco Systems at the time, so he would come across all sorts of interesting new technology in support of the Internet.

At the time, I was young and more interested in playing basketball outside. In hindsight, I wish I had been more of a tech nerd. Knowing how to code would have proved a much more useful skill than basketball for me.

One time during dinner, as I scarfed down my food as quickly possible so I could run back outside and play, I remember hearing my Dad discuss purchases with my Mom. He had bought into a local company. My ears perked up because I actually recognized the company’s name.

One of our neighbors had recently taken a leadership role in a small home building company. That company had just emerged from bankruptcy. At the time, the stock was going for about $5 a share. My Dad thought that it could be a low-risk, high-reward company, due to the fact that our neighbor was hopeful for the company’s bright future.

NVR Homes

My Dad thought this neighbor was a hard worker and could straighten out the mess with the right amount of time. He trusted in our neighbor’s abilities within the company. Plus, housing had just come out of a big downturn and had stabilized. That company was NVR homes. The stock price is currently trading for over $3,500 a share. And oh, by the way, my neighbor became the CEO of NVR in 2005.

The last report of his net worth is from 2007, which said he made $30 million and had 300,000 NVR shares. If he still holds that many shares, that means that he would have $1.05 billion. I knew a future billionaire. How crazy is that?

The funny part is that I use to drive to school with his two daughters since they lived on my street. For anyone who is thinking that I grew up in the lap of luxury, I didn’t. The stock price of that company didn’t explode until the 2000s.

Missing Out on Huge Earnings

Okay, back to the story. To put this into perspective, if my Dad had bought 2,000 shares at $5 each, which he was planning to do, he would have spent a grand total of $10,000. That $10,000 investment would be worth $7,000,000 today.

However, my Dad was talked out of the investment by a friend. Instead, he encouraged my Dad invest in a new restaurant business that he had planned to invest in.

That company was trying to change up the fast food game by promoting healthy eating, better food, and convenience for busy adults everywhere. My parents became big believers, and we ate there a couple times a month.

Boston Chicken

The company was rapidly expanding and using debt to fuel their growth. The stock was flying high for years, until the weight of debt caused them to become bankrupt. That company was Boston Chicken, today known as Boston Market.

That $10,000 investment that my Dad made in Boston Chicken, became virtually worthless overnight. It took our family quite a bit of time to eat there again after being crushed like that.

Looking back, my Dad wished he had not taken the bad advice from his friend. Of course, his friend was in no way being malicious in his advice-giving, but clearly, my Dad should have gone with his gut in this case.

The Impact of that Mistake

This experience definitely had an impact on my investing. Early on, I picked my own stocks while investing (something that I don’t do anymore). But, I avoided any companies that used large amounts of debt to fund their growth. On top of that, I was extremely hesitant to buy any restaurant companies. Although, I broke that aversion one time when I bought Chipotle. The result? I got slaughtered. I should have known better, I know.

Both my father and I have learned a lesson or two in investing over the years. Sure, some lessons are more expensive than others, but hopefully none are ever forgotten.

So readers, what investment lessons did you learn from your parents? Do you know any billionaires? Share your thoughts below.