My Biggest Blunder
July 30, 2007
– Comments (15)
Let’s face it, if we invest in stocks long enough we’re all going to make mistakes – some bigger than others, and I’ve had more than a few “Doh!” moments along the way.
In my Foolish interview I mentioned buying Yahoo at pretty much the height of the dot-com bubble, even though for a great while I had steered clear of all things tech – partly because I didn’t understand the industry well and partly because I thought the valuations were incredibly high. I ended up, like a lot of investors, succumbing to the frenzy after watching stocks like this go up, and up, and up, and missing out. I paid nearly $114 per stub for Yahoo in late August of 2000. Less than two months later I sold for about $60 per share. Ouch! Losing 50% is painful enough – doubly painful is the fact that I new better.
But this wasn’t my biggest blunder, not by a long shot. It’s not even my biggest % drop on a single stock.
That honor goes to Northfield Labs. I purchased this stock for $10.65 per share this past August. When I made the investment I knew it was a binary proposition. Either the clinical trials would go well, or they wouldn’t. Believing I knew the risks, I took a rather small position. Well, the trials didn’t turn out so well and the stock, which I still own, is trading for $1.28 today – a near 90% haircut. While this stock is my biggest loser, I don’t really even consider it an investing mistake. I knew the risks when I took them – sometimes we make a good decision, for good reasons, and things just don’t turn out.
Actually my biggest mistake ever wasn’t a stock I lost much money on at all. My biggest investing mistake ever is Apple.
Back when I was a relatively new Fool and long before I had a TMF handle (I’d been around about 4 months at the time), I wrote this post.
The day I wrote that post, Apple was trading for about $17.06 per share. It’s at $141.34 today. A nice 821% gain. But wait, it gets worse. There’s been a split since – so the shares are really up over 1650%. Of course you’re probably guessing by now that I didn’t buy shares back then, and you’d be right. While this would have been (and was) a pretty big blunder, it’s still not my biggest.
You see, I kept that post in mind, and kept Apple on my radar, and ended up buying shares a full two years later and at a lower price to boot. I took a bite of Apple in November of 2002, scooping up a few shares at $15.41 each. Good things come to those who wait, right? Those shares have enjoyed a nice 1834% gain. That’s about 86% per year for nearly 5 years!
Problem is, I sold them.
Actually, it embarrasses me a little to say that I held those shares for only about 2 months, selling them in January of 2003 for $14.16 each, or about 8% less than I paid for them. While I’ve had a few investing successes along the way, none of my successes come even remotely close to the one I let get away.
It’s one thing to decide not to invest in a company and watch the stock price climb significantly. Sure, it’s not the best feeling in the world, but one can’t invest in every stock that suits one’s fancy. That happens all the time, and really doesn’t bother me all that much. It’s quite another to actually have that bird in the hand, original investing thesis still in tact, and sell after just a quick holding period out of a sense of frustration because the stock price isn’t doing what one thinks it should.
That’s what happened to me. Don’t let it happen to you.
That’s why a lot of folks here at the Fool are always preaching to sell rarely, if ever. It’s also while a lot of Fools say to constantly invest new money so you’ll have a source of cash with which to pursue your new investing ideas (as opposed to what I did which was to sell something in order to raise the cash to buy something else).
Had I only listened I could say that my biggest investing blunder was my purchase of Yahoo. I wish! Because that’s a trivial, tiny little error hardly even worth mentioning when one compares it to the monumental mistake I made when I sold Apple.
Fool on!
Russell (a.k.a. TMFEldrehad)
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