Rewards For Foresight and Luck

Donald Trump could not resist crowing. The flamboyant Manhattan real estate developer confided to journalists last week that he had foreseen the end of the long bull market in August, when the Dow Jones industrial average neared its peak of 2722. Trump, 41, had accordingly cashed in the bulk of his stock holdings, some $500 million worth of shares in Allegis, Holiday Inns, Bally Recreation and other companies. As Black Monday loomed for less fortunate investors, the tycoon claimed he had made a net profit of some $200 million. Now, Trump declared, he intended to "stay in cash for a while, see where the world is going."

Tony Cafazza, 46, owner of a St. Louis company that sells and services cash registers, rang up profits even as the crash began. Cafazza had sold his stock holdings during the previous three months, for a profit of $100,000. Then, in September, he bought so-called puts on General Motors -- options to sell the company's stock at a fixed price in the future. On the Friday before Black Monday, as GM stock nose-dived 4 7/8 points to close at 66, Cafazza cashed in his options, which soared in value because their set purchase price was higher than the worth of the slumping GM shares. In the process, he made an additional $41,000.

Trump and Cafazza were among the thousands of U.S. investors, big and small, who beat the odds and emerged as winners in the midst of the stock market's bloodletting. Some of those players, like Trump, had sensed the big drop coming and took their profits before that climactic moment. Others, like Cafazza, in effect bet on the market plunge by making investments that rise in value when stock prices crumble -- either through options trading or a practice known as short selling. Yet another group of investors swooped aggressively into bargain-basement stock buying on Tuesday, after the Dow took its 508-point plunge, on the hunch that the market was certain to rebound. All of them proved that even on the worst of stock-trading days, there are winners as well as losers.

Some of the success stories were monumental. British Corporate Raider Sir James Goldsmith, 54, got out of the market well in advance of calamity. In late August he sold his 29% share of Occidentale Generale, a $1.55 billion Paris-based holding company that controls, among other things, the Grand Union supermarket chain, French publishing interests and vast stretches of Northeast U.S. timberland. Goldsmith's profit: $450 million. Having fled the market, Goldsmith declared, "I am a spectator, and will remain a spectator for the time being." An important factor that prompted Goldsmith to bail out of the market was the stubborn U.S. trade deficit, which, he had assumed, would eventually cause interest rates to rise and stock prices to fall. Said he: "This is exactly what has happened."

Ven Parameswaran, 57, president of First Asian Securities, a tiny New York City brokerage, earned a $13,750 profit last Monday using the same method as Cafazza: put options. Parameswaran made such a gamble on 5,000 shares of National Semiconductor, a Santa Clara, Calif., electronics company, which zoomed in value from 25 cents to $3 a share as the stock price of the firm tumbled 2 1/4 points on Monday, closing at 15. "I could have waited and got $4.25 per share for the options," Parameswaran said, "but I was not greedy."

There was more optimism than calculation behind the investment strategy of Ian Brown, 39, a Beverly Hills, Calif., plastic surgeon. Brown jumped into the stock market for the first time last week as the Big Board reached its record bottom, on the theory that things could hardly get worse. He bought $30,000 worth of shares in high-technology firms like IBM, Microsoft and Apple, with no intention of selling at all. Said Brown: "Now I'm just going to sit on them and watch and wait." By Friday the doctor's first foray into stocks was already beginning to look prescient: on paper at least, he had made a profit of $15,000.