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My Worst Trade
Many moons ago, I worked at Two Rivers Golf Club in South Dakota. At the time, it was owned by MidAmerican Energy, which itself was owned by Uncle Warren and $BRK.A.
I'll never forget that my checks came from 666 Grand Ave., Des Moines, IA.
Due to some creative accounting issues within the payroll department, I received a couple thousand dollars in a 401k from a class action lawsuit that showed we should've had a 401k all along.
Armed with this cash, I picked up about $1,000 worth of $EBAY, around $20 a share, after listening to a Motley Fool Money podcast highlighting how their upcoming spinoff of $PYPL would unlock value.
However, I switched jobs and had to sell and rebuy my investments in a new IRA, since they wouldn't let me transfer shares.
No big deal, sell and rebuy eBay, right?
Well, I didn't. I was convinced I'd found better options.
Now eBay is up somewhere around 100% in the time since 2015 -- which isn't too bad to stomach.
But, the PayPal shares I would've received have also doubled since (not to mention they were up as much as 700% just two years ago).
So while maybe this isn't the most significant swing and miss in the percentage of returns lit on fire, it stands out to me as one of my worst trades because I sold (and didn't rebuy) for reasons that had nothing to do with either company's investment thesis -- just merely that I was convinced I could do better, elsewhere.
This single event always comes to mind when considering selling a company I own and plays a significant role in explaining why I tend to hold forever, even with a temporarily broken thesis.
It all ties back to my FOMO on future returns from stocks that I sell too soon -- which always seems to be most investors' single greatest trading regret.
I'd be curious to find out if you all think of this as an overreaction to one event or if I might've taken the correct lesson from a poor trading decision.
Thanks as always for reading. 🙏
@joryko Thanks for the post, Josh. There will be always future opportunities to invest so no point pondering too much on past misses.
@joryko Correct.
Never beat yourself up over stuff like this. Hindsight is always 2020 and moves like that are unpredictable
@dividenddollars Absolutely, I appreciate that 👍
Just want to make sure I adjust accordingly for the future.
Chalk it up my friend. Like @dividenddollars said, hindsight is always 2020 and that thought process can lead to even more poor trades.
There will be another trade in the coming years that you swing and make contact on! Just sit back and wait for the pitch in your wheel house.
@plutus13 Absolutely right, thank you, Plutus 🙏
Thanks for sharing Josh. Looking at the past we all have missed opportunities but the most important here is to learn from this and only trade based on a strong investment thesis
@slt_research Exactly, thank you SLT — I’m learning to be much more patient with a broken thesis in general.
A lot of the news on a stock is noise, quarter to quarter. I always do best if I just wait a few days before doing anything. Doing nothing is usually my best move. 😂
Thanks for sharing! Hindsight is tough and it’s very easy to get shaken out of a position if conviction isn’t there. Emotions are a huge roadblock for most in investing. Always a great learning
@beaver_cap absolutely, thank you for reading.
I’m optimistic that the value from the lesson learned will outweigh the returns lost here over the long term.
@joryko I am sure it will!
Nice takeaway from the experience. Thanks for sharing!
These are the kind of mistakes that you shouldn't beat yourself up about Josh, we will always miss returns!
@investmenttalk Thank you, Conor🙏
Similar situations will occur in the future and this will have helped me prepare for them, Im hoping.
Like Buffett says, investing is a no called strikes game. There will always be others to swing at. I try not to think about it as FOMO, which has an overly emotional connotation in my mind, but I do try hard to be biased toward buying and biased against selling. When I'm looking at an opportunity that I'm on the fence about—and very often when the only thing holding me back has to do with valuation—I'll just throw a little bit of money at it. I know the worst I can do is that the share price goes to $0 (which has happened, though rarely!) but I also know that for some of these, the sky is truly the limit—and I consider that a risk worth taking. There's always always the option to add more later.
@tomato Fully agree with you on the bias towards buying. DCA buys have been a game changer for me.
Removes the anxiety from any sort of timing and just gets me started, rather than waiting forever on a perfect price or moment in time.
@joryko How frequently do you buy when you're DCAing? Monthly? Quarterly? And when do you stop adding?
@tomato I typically add money weekly, but I vary which stocks I add to, so it may not qualify as "traditional" DCA'ing.
As long as my investment thesis is intact, management is executing well, and it hasn't grown past a risk-reward sizing that keeps me awake at night, I'm happy to add until it becomes 10% of my portfolio or so. After that, I'd rather just let it run on its own.
$KNSL is roughly 10% of my portfolio and my largest holding, but I still add to it on occasion since it continues to fire on all cylinders and generates an ROE above 20% almost no matter what happens quarter to quarter.
great read. We all have those companies, for one or another reason we missed out.
@rihardjarc I appreciate that - - thank you 🙏
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