Martha Stewart

A brief history

At the age of 13, Martha Stewart started modelling as a means of paying for her college education. She became a stockbroker in 1968, but left after five years to start a catering firm.  In 1974, a publisher attended one of her dinner parties. The resulting book, 'Entertaining', became one of the most successful cookery books in US history.

In 1999, her company 'Martha Stewart Living Omnimedia', listed on the stock exchange in New York with a market value of over $1.5 billion. By 2001 her magazine 'Martha Stewart Living', was selling over two million copies a month. She has starred in several TV and radio programmes and has written many best selling books.

Martha Stewart's decision to sell her 3,928 shares in 'ImClone' a day before the stock crashed saved her $50,000. Unfortunately, the subsequent investigation into insider trading and a jail term wiped $85m off the value of her company. However, Martha quickly bounced back with an estimated $5m book deal. By the time she left prison in March 2005, the shares in her company had rebounded, following news of a reality TV deal -  "The Apprentice".

In the year after her release from prison, despite being under house arrest for five months, Martha Stewart made $3.56 million from her company, $8m from TV appearances and $1.6m from 'The Apprentice'. In addition to these holdings she has many other businesses. In January 2007, her fortune was estimated at $638m.

What can we learn from Martha Stewart:

Her investment portfolio had to be made public during her  insider trading trial. This revealed an investment portfolio made up of 35 stocks which was heavily overweight in high techs such as: Apple, Nokia and JDS Uniphase.

Her portfolio lost 47.35% of its value from June 2000 to December 2001. It showed that at that time her investment decisions where affected by cognitive biases and emotions. She watched a lot of her gains evaporate, by not knowing when to sell. By failing to have a diverisified portfolio, she broke a golden rule of investing.

These are  valuable lessons that we can learn from Martha Stewart. It would seem that even highly successful entrepreneurs such as Martha Stewart can struggle to find enough time to research stocks and shares sufficiently.

One of the positives that can be learnt from Martha Stewart is perseverance and the will to move forward in the face of adversity.