The million-dollar waitress

By Tim Catts

updated 5:40 p.m. ET June 20, 2007

It's Friday afternoon in the tiny Appalachia town of St. Clairsville, Ohio, and Mary Sue Williams is about to begin her shift as a waitress at Undo's, a spacious Italian restaurant that overlooks Interstate 70. She enjoys taking care of her regulars, she says, and after nine years in her job, she has accumulated plenty of them. Even with dozens of the restaurant's tables empty, she cuts quickly across the floor to the bar to refill an empty water glass. "I'm going to do this until I can't walk," Williams says, insisting that she wouldn't quit for a million dollars.

That conviction may soon be put to the test. Williams could be in line to win the stockpicking contest sponsored by cable channel CNBC, which carries a million-dollar grand prize. According to the last official standings, posted on May 25, she was in sixth place, with a 29 percent return during the two-week final round. But as BusinessWeek first reported, a handful of top finishers are suspected of exploiting a loophole in CNBC's trading software to inflate their returns. CNBC later acknowledged the problems and said it will disqualify contestants who violated any of the game's rules. Based on BusinessWeek's analysis of the trading results for the contest's finalists, Williams appears to be the most likely winner.

Mother-in-law knows best
It would be a fairy-tale ending for a contest wrought with drama and controversy. Williams, 46, has been a waitress for 20 years and was a welder before that. She has never bought or sold a real stock in her life. In fact, she says she never even paid much attention to the markets before signing up for the challenge. Yet Williams has already bested thousands of financial professionals who entered the contest with Ivy League degrees and complex trading models. "Part of this was luck," she says. "A lot of it was a gut feeling, some eenie-meenie-minie-moe, and common sense."

A victory for the little guy? Well, yes. But it's also sign of what Paul Auster once called the "music of chance." Picking stocks is about luck as much as strategy. In a field of 375,000 contestants with 1.6 million portfolios, someone has to finish first. Lubos Pastor, a finance professor at the University of Chicago's Graduate School of Business, says that in a contest like CNBC's, with a short time horizon, there's no reason that the pros should have any advantage over novices armed with smart strategies and good fortune. "If you have 1,000 people flip a coin 10 times, one of them is going to get 10 heads in a row," he says.

Williams and her husband, Mark, entered the contest at the urging of his mother. "I watch CNBC all the time and I thought, 'Oh, this might be interesting for them. They might learn something about the stock market.'" says Lauretta Williams, 79, a retired nurse who lives about 10 miles away in Wheeling, W.V., and does some long-term investing through a Charles Schwab account she's had since the mid-1990s. Though she and her husband have had a computer with Internet access since their 50th wedding anniversary last year -- their children gave it to them as a gift -- Lauretta says she didn't sign up because she "just didn't want to spend the time with it."

Personal strategy

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Mary Sue Williams lives with her husband and youngest daughter in a two-story house at the end of a brick lane that often serves as a parking lot for students at the town high school across the street. Just up the hill lies Main Street, the Belmont County Courthouse, and downtown. On a recent sunny afternoon, traffic clogged up as a road crew repainted the crosswalk underneath one of the town center's two stoplights. Mark, who holds a degree in archeology from the University of Arizona, is a cook at a nearby Denny's. After entering the CNBC contest, he didn't make it out of the contest's 10-week first round.

His wife followed a straightforward strategy, one suggested to her by her mother-in-law. She typically spent about an hour a day checking the financial Web site Earnings.com for companies that were about to announce their quarterly results. She figured that companies reporting earnings were the most likely to see big moves. To pick specific stocks, she used the Warren Buffett approach: Invest in what you know. "I was looking for companies that had something to do with my life," she says. That led to some of her most memorable picks, among them lubricant manufacturer WD-40 and Crocs, best known for its sandals.

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