Many years ago, Fred Fern had some money burning a hole in his pocket. A family friend, a stockbroker at PaineWebber, suggested Fern invest the money and subsequently bought the young man shares of IBM, the bluest of blue-chip companies in those days. Fern recalls himself thinking at the time, “I am invested in IBM and have all the answers.”

Such hubris was short-lived. Fern received his comeuppance during the winter of 1961 when the stock market turned bearish and shed 28 percent of its value and, shockingly, IBM’s shares plunged by more than 50 percent for about six months. Fern lost his nerve and sold his shares at a major loss.

“I realized how little I knew about investing and I wanted to learn.”

Fern soon saw a newspaper advertisement that would change his life. The ad had been placed by William O’Neil, who would later become the founder of Investor’s Business Daily, though at that time he was a stockbroker with Hayden, Stone & Co. Fern went to hear O’Neil speak at an investment seminar hoping to better understand why he lost money on IBM and how to better invest.

“Bill preached charting in those days,” Fern says. “Charting was witchcraft; no one wanted to do charting. I found it fascinating. I approached him after the seminar and said, ‘Bill, would you become my stockbroker?’”

He agreed to take Fern as a client, but his new client added, “I don’t want to just do what you tell me to do, I want you to call me and explain why. O’Neil called me one day and said, ‘Fred, there is a stock that has got a perfect chart pattern with great fundamentals.”

The company being touted by O’Neil was Syntex, a pharmaceutical company that had formulated what Fern calls “one of the best new growth stories of the time,” the birth control pill. “It revolutionized everything, so I bought the stock at $30, and it went to something like $190. Now I had all the answers, and I realized I wanted to get into the investment business. That is the story of my life, better lucky than good.”

WAYNE’S WOLRD

Fern started Churchill Management Group in 1963 at age 25 with no formal investment advisory experience, banking instead on the strength of William O’Neil’s mentorship. His aim was to create an investment counseling business without inherent conflicts of interest with the brokerage world, and a place where he could charge clients a flat fee. Initially, he planned to call his new business Fred Fern Associates, but when Michael Wayne — John Wayne’s oldest son and Fern’s dearest friend — caught wind of that, he told Fern to instead name his new business after Winston Churchill.

“Well, I am a lucky man, because I sure did name it after Winston Churchill, and he has been the hero of our lives for decades.”

IF THE SHOE DOESN’T FIT …

Fern considers himself imbued with the same entrepreneurial spirit as his father, who owned and operated Fern Shoe Co., a manufacturer of women’s shoes. It was a time in cultural history when a son would naturally go into his dad’s business, and eventually succeed his father in owning and running the business. The younger Fern turned out to be an exception to that. Though he worked at his father’s company for a short time, he headed off to UCLA to get a business degree, with the determination that investing was his life’s true calling.

The elder Fern eventually sold Fern Shoe Co. and late in life worked for a brief time at his son’s wealth advisory firm before passing away.

GOING TACTICAL

Among the lessons he embraced from William O’Neil was that it’s not how your investments earn, it’s how much of that yield you are able to keep. Going back to his IBM experience, Fern explains that when the company’s shares dropped by 50 percent, investors had to make back 100 percent just to break even.

“I learned right there the importance of keeping losses small,” he remarks. “This is what Bill O’Neil preached.”

With that lesson in mind, the use of tactical investment strategies became the foundation of Churchill Management’s investment approach, giving its clients downside protection so they do not absorb the full brunt of market downturns and the long climb back to wholeness.

“You do not want your portfolio to get smashed, so we preach the tactical strategies to make it and keep it.”

Fern’s favorite asset class is stocks, though he is also a proponent of real estate, having established the Churchill Management affiliate Chartwell Properties, named after Winston Churchill’s home of the same name.

“How about that for a perfect name?”

Fern calls himself a true believer that all investors should have assets in their portfolio that rise in value when inflation strikes.

“We are not going through inflation now,” he says, “but it will come.”

“Make sure you own some real estate,” he says, “because when inflation comes — and it is coming — you are going to want it.”

ASLEEP WITHOUT THE WHEEL

Fern and his wife have a second home in Palm Desert, Calif., where his real estate holdings include The Shops at El Paseo.

“I consider it the most beautiful place on earth for nine months of the year.

For decades Fern has spent half the week in Palm Desert and the balance at Churchill Management headquarters in Los Angeles. On the drives to Palm Desert, he catches some valuable shuteye, as his wife of 60 years insists on taking the wheel.

“I have a darling, darling wife,” he says. “I started dating her when she was 16 and she insisted on driving, and I said ‘yes.’”

Among his recreational activities at his desert community is golfing, “and, yes,” he says, “sometimes the ball goes in the air.”

“We have just a great life down there.”

Asked, as he prattles away, if he is an introvert or extrovert, Fern quips: “Well … don’t ask my wife.”

THE WRITING ON THE WALL

Even now, at age 82, Fern is no potted plant. He starts each workday morning by meeting with his five-person research team, the people in charge of managing clients’ money.

“We watch the details carefully,” he says.

To this day, Churchill Management maintains a chart room, with charts printed and pinned to the walls for observation, rather than viewed strictly on computer screens.

“In today’s world people say, I don’t need a chart room, they say they can get it all on their iPad or iPhone. Well, you can, but you don’t get the same perspective you get when looking at them in a chart room.”

He acknowledges that charting is not an exact science, rather a science of probabilities.

BUSY HAVING FUN

“I am a very busy man,” says Fern. “I always tell people, I haven’t worked a day in my life, I have only had fun. I go to the beach for dinner many times with a good friend. I just want to grab a good life, and that is what it is about.”

Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.