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.

 

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