New Article John LeFrere, an analyst hired by Michael Steinhardt in the 1970s, recalls his first weeks on the job; he visited IBM and returned convinced that its profits were headed upward. LeFrere recommended buying IBM stock ahead of that Friday's quarterly results, but Steinhardt pushed back. He had been watching IBM splutter about aimlessly on the stock ticker, and he had a black feeling in his gut that the stock was going nowhere. “Mike, I think you're wrong,” LeFrere said. It took courage to contradict Steinhardt, but LeFrere had a strong build and figured he could bench him. “I hate the pig,” said Steinhardt. “Mike, I don't care how it looks on the tape. The results are going to be good and the stock's going up.” Steinhardt's contrarian radar flickered. “How much you want to buy then?” “How about ten thousand?” LeFrere ventured, calculating that, with IBM trading at $365, owning three and a half million dollars' worth of one stock was about the maximum conceivable. Steinhardt hit a button and ordered his trader to buy 25,000 IBM immediately. “Mike, I said ten thousand,” LeFrere said anxiously. “How convinced are you of your fuckin' opinion?” Steinhardt barked. “I'm very convinced.” “You better be right,” Steinhardt said grimly. He hit the button again and bought another 25,000. That exchange left Steinhardt with some $18 million worth of IBM, representing perhaps a quarter of his capital. It was a hefty concentration of risk in one stock, five times the size that LeFrere had recommended. But when IBM's results came out at the end of the week, the stock shot up 20 points, yielding an instant profit of $1 million. LeFrere had survived his rite of passage. microcapclub.com/are-you-an-…

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