Young Gun Stock Picker Scores Big Returns

By Rick Munarriz

When you think of Wall Street's legendary investors, it's easy to picture seasoned elders donning polyester suits in smoky boardrooms. Even the boyish-looking Peter Lynch went prematurely gray.

You certainly don't picture someone like Matt Koop -- all of 23 years old -- to be trouncing the market averages. He has, though.

An investor since his teens, Matt has already managed to more than double his money by buying promising growth stocks that have panned out.

Matt's a quick learner -- no surprise, given that he's the son of a biology professor and a math professor. His parents encouraged him to make his own money. At their insistence, he took a summer job making salads at a local restaurant while still in high school. It didn't take him long to realize that he would rather be elbow-deep in another kind of greenery.

Matt decided to turn his hobby -- writing Web site programming scripts -- into a money-making venture and began scripting applications for other Web site operators. It made majoring in computer science a no-brainer. He graduated in 2004 but hasn't strayed far from the ivory tower; Matt's still in school as a second-year Ph.D. student.

But it wasn't the money he made in high school that fueled Matt's early stock-picking success. It was the compensation he got for yet another early working gig.

The gift that keeps on giving
His stock market indoctrination came at an early age. As a teen, Matt was a community leader at the GeoCities network of Web sites. In exchange for helping other registered users set up their Web pages on the site, he received five shares of GeoCities. The company was eventually acquired by Yahoo! (Nasdaq: YHOO) in 1999.

That was just a taste, and it left Matt hungry for more. For his high school graduation present, his parents opened -- and funded -- a Roth IRA in Matt's name. His dad suggested a few initial purchases, and some, such as Halliburton (NYSE: HAL) and high-yielding real estate investment trust Liberty Property Trust (NYSE: LRY), more than offset his loss from WorldCom.

Matt hasn't neglected that IRA. Even though he is still decades away from retirement, he has continued to contribute to the tax-advantaged investing vehicle -- and it has paid off nicely.

Turning $9,361.11 into $20,866.42 is no easy feat, especially because the first few years of Matt's investing life came during a time that many considered to be a bear market.

Matt got there by developing his own investing style along the way and using it to find market-crushing stocks. Some of those companies, however, were ones other investors avoided. One in particular ...

Forbidden fruit
After purchasing a first-generation iPod a few years ago, Matt bought into Apple Computer (Nasdaq: AAPL). There were dark clouds around the company. It was barely trading for more than the liquidity on its balance sheet. However, Matt had always been a self-described "Mac nut," dating back to his first Mac SE.

A traditional investor would have balked at buying Apple. A speculator steeped in conventional wisdom would have avoided a company with a shrinking share of the computing market and an unproven -- and lower-margin -- digital music player.

Not Matt. His success as an early adopter with Apple worked out perfectly. He recognized that the company was creating a distinct advantage, which is a trait he's found in many of his winning picks.

"I prefer areas where there is something that differentiates a company that cannot be easily reproduced by another company," he explains.

It's why he has been drawn to add young biotechnology companies like BioMarin (Nasdaq: BMRN) and Myriad Genetics (Nasdaq: MYGN) to his growing portfolio.

"For biotechs, that moat is easy to see," Matt says. "Patent protection and the requirement of FDA approval can maintain value for the company that developed the drug. Even if there is competition from other drugs for a given condition, in large markets even having only a small fraction of the market is good enough to sustain a small biotech."

Brown-bagging it to the bank
Matt enjoys investing. He sees it as a hobby, and that's why the five to six hours a week he dedicates to keeping up with his stocks and unearthing new ideas isn't a chore.

Soaking in all of the education that the stock market has to offer has also helped Matt appreciate the value of money. Matt and his wife have made it a point to live below their means. They both drive cars that are at least eight years old. They bypass first-run movies and catch the $1.50 matinees at the second-run cinema.

Most folks Matt's age don't get it. Recently, a co-worker asked him why he brown-bagged his lunch from home instead of hitting the McDonald's drive-through. His friend figured that Matt was just scraping by on the eve of their next payday, but that wasn't it at all. Matt's not living paycheck to paycheck. He's living stock pick to stock pick.

Even if Matt doesn't make another contribution to his IRA -- something that is highly unlikely given his investing mind-set -- Matt may already be set for retirement. That $20,866.43 earning 12% a year in his tax-sheltered Roth IRA would be worth more than $2 million by the time Matt turns 64. That's quite the nest egg. It sure beats a cheeseburger value meal.

Five months shy of his 24th birthday, Matt has already amassed what more seasoned investors would consider a healthy lifetime of investing decisions. He's a winner, but you don't have to peek at his brokerage statements to figure that out.

Come over to his place, and you'll see that he's turned disassembled hard drive platters into beverage coasters. Despite his early and prolific embrace of the new economy, he wakes up every morning to three daily newspaper subscriptions. And even though most young couples wade in piles of debt, Matt and his wife pay off their credit cards in full every month and utilize the plastic strictly for its cash-back rewards.

Breaking the rules has made all the difference in Matt's young life. It's amazing what one summer of tossing salads can inspire.

Matt was one of five finalists in the "I'm a Rule Breaker" contest earlier this year. He is a subscriber to the Motley Fool Rule Breakers newsletter service and has bought seven of the active stock recommendations.

Longtime Fool contributor Rick Munarriz wishes he could go back 15 years to avoid the investing mistakes he made at 23. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. Rick is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.