The investments that got away…

I generally have no regrets with my investment journey to date. There have been some lessons, most pretty inexpensive, and some that were more costly. I’ve generally never regretted any investments that I have made. There were a few that got away however. 

 

The benefit of hindsight is a beautiful thing. I doubt that anyone can honestly say they’ve never taken any missteps, particularly when it comes to their investing journey.

The early part of my investing journey was blighted by a bunch of speculative tech companies with no clear business model. It likely should have been clear at the time that these were companies that I should have steered clear of, but that’s something I’ll readily put down to a novice mistake.

The lead up to 2007/2008 was another rookie mistake, where a strong bull market run lead to too much margin debt with expensive consequences.

But I’ve had a few more subtle mistakes, which were failing to chase a few potentially promising investments at times when they were reasonably appealing.

Johnson & Johnson

I find it hard to really beat myself up too hard about this one, but I declined to pick up Johnson & Johnson when it was in the low $60′s just 3-4 years ago.

For many years, I was a strong admirer of the Johnson & Johnson business. However pharma has generally become a business that has been blighted by high R&D costs, difficulties sourcing the next big blockbuster and fast moving generics who pull the rug out from under you quicker than the time you have to monetize your drug discovery.

Johnson & Johnson has rallied pretty hard since the time I looked at it in the $60′s. It’s now trading around $100. I’m still undecided as to whether it really is the quality business that it once was. Some acquisitions in the orthapedics business have turned the profile of the company into something very different that what it was just 5 years ago. Nevertheless, it’s hard to argue against a business that has withstood the test of time.

Chipotle

When I first arrived as a student in the US, I remember being introduced to Chipotle, and I couldn’t get enough of it. The cheap and tasty snack got me through many a day during my cash poor graduate days. It was thus with a great deal of interest that I watched the float of Chipotle, but miseed the chance to pony up to invest.

The trick that I missed with this one was just how well a regional to national retail franchise can scale if it has a standardized concept that is easy to replicate. The lesson should have been clear with McDonalds. I should have further taken to heart that the company was being spun out by McDonalds. Frankly, I never saw just how rapid the revenue growth would be.

Lesson now learned. Chiptole has had a 10 bagger since listing, up more than 10x since it’s market debut in 2007

Google

The Google IPO really does leave some unpleasant memories. Having been following the search market during the early days, I was able to see the potential of just how search could completely revolutionize advertising. I was very interested in the IPO. But Google did some strange things in the lead up to the IPO which were a little odd. They did a dutch auction placement for their stock, which was a little unconventional. Their prospectus was not particularly transparent or investor friendly. I wasn’t entirely confident that I wouldn’t get screwed around as an investor in the company.

Fast forward a decade later, and it’s clear that Google have done more than right by investors. The stock has gone up more than 10x.  The Google advertising business model, is overflowing with cash. More cash than it seems the founders really know what to do it, hence it bleeds over into wacky projects that get funded, many of which will never be commercialized.

As a user of Google services, their data collection and insights into user behavior scares me. As an investor, though I just seen the cash register ringing. This company will continue to be a cash machine. Their view of investor rights still looks a little suspect to me though, as seen by the recent stock split the company did. If there is ever a material correction that makes Google stock a bargain, this is one company that I’d be happy to run the ruler over once again.

 

Comments

  1. Scott says:

    Integrator,

    I’m right with you with the Google IPO. I was in college at the time and had the opportunity to get in at around $80/share. I was thinking it was going to open closer to $30-40 so thought $80-ish was just too much. A few months later I was kicking myself again…up to $150 but now I can’t invest because it is over-valued. Not too much later it had doubled again; now it had to be definitely over-valued, right?! I really wish I had bought at $150!

    As you know, the stock kept going up and up, and I kept thinking it was over-valued each time. Really wish I would have bought nearly at any point over the last few years!

    But a split-adjusted $1034 is just too much now. It has to be over-valued, right?

    Scott

    • Integrator says:

      Scott,

      Interesting question as to whether Google is overvalued. Based on its current PEG, it may be about 10-15% over valued. So there’s likely a little overvaluation, but not too much. I hazard a guess that folks would still make out well even if they bought at these levels.

  2. Integrator,

    Thanks for sharing!

    We all have the ones that got away. So many stocks, so little capital. :)

    The first one that comes to my mind is Visa. I looked at it upside and down around $90/share. And I passed. I still can’t believe it. Made a huge mistake on that one.

    But it won’t be the last time I make a mistake like that. The good thing, however, is that I can make mistakes like this and still achieve my goals!

    Best wishes.

    • Integrator says:

      DM,

      Interesting one on Visa. Morningstar suggests current fair value is $223 right now…so Visa at current prices may yet be considered a bargain! For higher growth companies, your intrinsic value rises far more rapidly, so buying at a fair price than a bargain price could still see solid long term returns. Visa is a keeper.

    • Visa is one of my regrets, even though I own a large chunk of it. From the time Visa IPO’ed I identified it as a stock I wanted to own, but I just kept holding off and didn’t pull the trigger on buying it for what turned into a few years. Instead of getting in at ~$70 I finally bought in the $130′s.

  3. I think we’ve all got stories like this. Its so much easier to see these things with clarity in hindsight. The best we can do is learn from it and keep trekking. Ultimately, we may make some less than ideal choices, but we only need to make one or two brilliant ones to really make it work!

    • Integrator says:

      I feel I need to back my instinct a little more. With a diversified portfolio, you can ride out any 1 or 2 bad lapses in judgement. To the contrary, picking a strong business with solid fundamentals can create solid outcomes.

  4. For me no question it was Constellation Software in late 2011. It was trading at about $80 and was yielding about 4%. I was all set to buy it, but thought I would wait until I received some year end dividends from some mutual funds I was closing out. BIG mistake. Next thing you know Constellation had jumped to about $100 and I thought I had missed it. BIG mistake #2. Last I looked it was trading at $260 and rising.
    Oh well, easy come, easy go…

    • Integrator says:

      Wow… 3x…I’m not sure how speculative or not Constellation Software is, but I generally don’t feel as bad missing out on smaller or more early stage opportunities. It’s the no brainers like Mastercard that go up 10x that really feel like a blow to the stomach.

  5. Evan says:

    Ugh! Investing hindsight always frustrates me. If I just didn’t spend like an asshole in college and had a tiny tiny tiny amount of focus I have today regarding this world I would be in such a different situation.

    • Integrator says:

      Best not too beat yourself up too much for things that are out of your control. I lost a bit of money initially on a tech stocks, but fortunately I learned the lesson fairly fast once I started bleeding.

  6. Martin says:

    Ha, I am glad I didn’t make that mistake with JNJ :) Well, but to be honest I made a bunch of other mistakes where I failed to pick up a good DGI stock or on the other hand dump a stock which no longer met the DGI criteria.
    My biggest mistake was ignoring DGI when I first found about it as I didn’t consider 3% dividend as anything stellar.

  7. pkan51 says:

    Talk about investments that we use regularly, Costco and Under amour would be good ones for me. Love to shop at Costco and wear Under Amours but never had the gut to invest in it during IPO.

    Same story with GOOG. Remember hearing the company will go public but the idea of $100 per share turned me away.

    • Integrator says:

      Costco would have been a good one…solid, sustainable business with goo track record of expansion. Very high rates of return on equity if I remember correctly.

  8. Shoulda Coulda Woulda ! We all have the same stories. It just stings everytime we hear the company in the news or when we look at the share price. We just rather they do not exist lol

    • Integrator says:

      lol! agreed on the stinging part!.. Sometimes Mr Market presents attractive re-entry opportunities. The key is to be awake to them and take advantage when they emerge.

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