“I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.” –Charlie Munger
The other day I noticed that Starbucks had made a new, all-time high, even in the midst of the steepest stock market correction in 4 years. And it got me thinking about the worst investing mistakes I’ve ever made.
No, these were not really bad trades. These were more like what Warren Buffett calls his, “mistakes of omission,” investments he didn’t make but should have. For example, I think I remember him lamenting his decision not to invest in Coscto back in its early days. This single mistake is far more costly than any of his, “mistakes of commission,” where he bought something he shouldn’t have.
But mine are even worse than this because I actually did make the investment and I was proven right… I just sold way too soon. If I had just hung on rather than take premature profits, I would have made many, many multiples more money than I actually did. And the gains I missed far outweigh any of my worst losses.
Back near the financial crisis lows I bought a fairly sizable chunk of Starbucks (SBUX) stock around $5 per share. At the time I was amazed that, in the midst of the worst recession in decades, this stock had lost 75% of its value even though the company’s earnings didn’t decline at all. People were hurting financially, like they never had before in their lives, but they were so addicted to the product they couldn’t stop buying it! What a business!
Like a jackass, I sold it when it hit $15 a year later. Not a bad trade but the thing is the stock’s $60 today. I could have more than tripled my money again after first tripling it in 2010. Epic fail.
Here’s another example: When Devon Energy’s (DVN) stock was halved in 2001 I noticed the company announce a major buyback, something like 20% of the outstanding shares. At the same time the top executives started buying with their own money and in size. This got me looking at the supply/demand equation for natural gas along with the company’s valuation. It was very cheap and highly levered to gas prices which looked like they would inevitably rise over the next few years.
