You know what would be fun? Listing out all the stupid things I’ve bought and the total money I have lost doing so. I’ve probably made a bunch of errors of omission, but let’s take a look at those errors of commission.
I wrote about a few of the losers and stinkers I’ve bought back in late-2016. Here are some of my dumber moments, ranked from worst to bad. These errors only take into account the total dollar loss, but does not take into account the lost opportunity cost of the capital had it been invested in something far less stupid.
1. Overstock (OSTK)
Total Loss: -$345
I simply lost my mind for a period of 2 weeks, bought some Overstock on the hype on its blockchain Tzero thing, thought it was a smart way to play blockchain (it wasn’t) that was backed by a real, albeit mediocre, online retail business. Bought at $75, check the price action waaaaaay too much over the next 2 weeks, realized I was a moron, and sold for $64. What made me realize I was a moron was that checking all the social media feeds for $OSTK made everyone involved sound like they would eventually end up being quoted on Bagholder Quotes.
Lesson Learned: Avoid anything where both longs and shorts sound like bagholders.
2. BHP Billiton (BBL)
Total Loss: -$233
I don’t know what I was doing buying a mining company. I don’t know a single thing about mining, ores, or what part of the commodity cycle we are in. To be honest, I saw a fat dividend and “this is the largest mining company in the world” and thought that was enough. Silly me. Bought initial stake at $44. Oops. Price continued to melt down. Dividend was cut. Bought some more at $24 when the news broke of that huge dam breaking in Brazil to average down that painfully high cost basis. Bagholded for a while more. Sold everything at $27.
Lesson Learned: Avoid mining, don’t know enough and not interested to know more.
3. Gilead (GILD)
Total Loss: -$105
The bane of value investors. Looks cheap, still makes tons of profits, but revenue is shrinking and no new blockbuster drugs on the horizon. A melting ice cube. Bought some at $78, sold a couple months later at $75. I was like a moth attracted to a flame, dazzled by the low p/e and dividend yield. Once I looked close enough, I realized I knew absofuckinloutely nothing about biotech and sold.
Lesson Learned: Avoid biotech, don’t know enough and not interested to know more.
4. Chipotle (CMG)
Total Loss: -$33
I bought some at the beginning of 2016 as the first cases of food poisoning hit and the stock was getting beat. Bought some more throughout the year banking on a relatively quick turnaround. I was in this for the turnaround story. I should have heeded the advice that turnarounds seldom turn. When you give people diarrhea and that news explodes all over the world, and then it happens again and again… it’s a pretty shitty sign. This one wasn’t bad in terms of total dollar loss, but what made it on the list is that it locked up a bunch of capital that could have gone into something exponentially better. Ugh.
Lesson Learned: Turnarounds seldom turn (relearning what I had already learned vicariously).
Total Losses: -$716
In my fledgling career as portfolio manager, these are the worst culprits. I suppose ~$700 in losses isn’t too bad in the grand scheme of things relative to portfolio size. At the size of the portfolio today, that registers below 0.50% of the portfolio. But still, I don’t like losing money.
There you have it: these are the honest-to-god worst errors of commission I’ve made with my stock picks since starting in 2014.