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Analysis of My Best and Worst Investments

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A couple of years ago, I decided to take a small portion of my retirement and actively invest it. Unfortunately, I didn't do it in such a way that I can easily gauge performance. Fidelity's tools aren't all that great (or maybe it is that I can't find them), but it is further complicated by the addition of new cash.

I'm kicking myself for setting up something so flawed. At the same time, I don't know how I would have done much better. I don't want to change my whole retirement structure so I can report performance on the blog (though it would be worth knowing for myself).

Like every stock-picking investment to date there's been some good and some bad. I thought I'd review them and see what, if anything, can be learned from them.

I'm going to start with the good. It's going to look like sunshine and rainbows... that's the nature of covering "the good."

  • Groupon - I dollar cost averaged at buying shares around $4 a share and sold them for around $8 a share. This is a rough estimate. I usually retain some shares in businesses that I believe in, but I just wanted to flip it and get out. I realized that I bought it for the wrong reasons. I bought it because I thought it was cheap and couldn't get cheaper (downside protection is a common theme). It worked, but I wonder if it is more luck than skill.
  • Zenga - Much like Groupon, I bought it at a very cheap price... around $2.50 a share. I had confidence it wouldn't go much lower because they had cash and real estate assets almost equal to $2.50 a share. It was like the company was valued at zero. It got up to around $4 and I sold. I didn't believe in Zenga's long-term business, so I got out.
  • Facebook - This was my biggest win. I bought shares that I dollar cost averaged at around $21.25. Unfortunately, I sold most of them at around $32. I still hold 25 fantastic shares, which at $94 is not half bad. Remember all that talk about the bungled IPO? Me neither. Remember the talk of ridiculous evaluations? Well at a P/E of 95 it isn't cheap, but it isn't crazy like Amazon either.
  • Google - I'm not sure this counts as part of my experiment because I bought so long ago. I bought at split adjusted $295 a share. At $665 today, it shows no signs of slowing down.
  • Apple - I loaded up at a split-adjusted $71 a share, but sold off a pile at $100 a share. It would have obviously been better to hold onto the shares, but I'll look optimistically for a minute.
  • -
  • And now for the bad...

    • SodaStream - When it dropped from $50 to $37, I jumped in. Of course I'm smarter than the market and a small revenue miss wasn't a big deal... especially in getting a 25% discount. Today it trades at $17. I had a few more trades in between where I made a few dollars buying low and selling a few dollars higher, but I took a sizable loss on most of the shares.
    • IBM - I bought it at around $170 and had a chance to sell at $200 a share while back. Now it is $160. I read it is Buffett's biggest holding. I think he likes it for the same reason I do... a P/E of around 10. The revenues are shrinking every quarter, but they spend a lot of money buying back shares. They also pay dividends. IBM is in transition as it moves away from mainframes and chips and more towards cloud computing. It's taking years and will probably take a few more, but I think it is going as well as could be expected.
    • Yahoo - I bought this because the money they were getting from the Alibaba shares essentially equaled the value of the company. I figure this gives me Yahoo's business for free. I was up for a little while, but now I'd down about 7%. I think Marissa Mayer is very smart and I'm optimistic they'll get things figured out.

    You'd think there would be a lot more bad in there. The "bad" is mostly in the form of lost opportunity. There are some investments that did nothing while the general market has gone up. My investment in Russia stocks is one example. My investment in Twitter is another example of money going nowhere.

    If I had to guess I'd say that it probably all comes out to market average. I did well with some and others I had essentially dead money. This reinforces what I thought all along... stock picking isn't going to driver of wealth for me. I'm fine if I get market returns... or even slightly below market returns.

    Why would I be fine with below market returns? It's a small amount of my portfolio. I'm learning a lot. I'm having fun. Losing or gaining a percent or two on a small amount of a portfolio isn't going to add up to much over the long haul.

    All that said, here are the things I've learned about myself in investing:

    1. I Like Technology - I already knew that, but I had to point out the obvious here. Almost all of the companies mentioned are, at least in large part, software companies. (Apple is more software than most people think.)
    2. I Like Buying Cheap and getting Downside Protection - Even the big technology winners were bought fairly cheaply. It may be hard to remember it now but there were major questions about Facebook and Apple.
    3. I Let Loose the Small, Fad Companies - I viewed Zenga and Groupon as fads and I'm probably more lucky than good in making money with them.
    4. Don't Necessary Buy What You Love - I'm a huge fan of SodaStream's products, but that doesn't necessarily lead to profits. I thought that their focus on healthy fizzy water and cost savings would be a winner with consumers, but I guess I was wrong. I can't see why it isn't in most households. I'm probably naive, but I keep holding on to a few shares hoping the general public sees what I see.

      It's probably a very bad omen, but I did the same with shares of Palm. (Yes, I laugh at Samsung commercials showing off wireless charging, when I enjoyed a superior version of it back in 2009.)

    I think the #2 and #4 points are probably the best ones to take to heart. Even my loss in SodaStream could have been much, much worse if I didn't buy on the dip.

    If I were to translate these insights into an investment today, I'd say that commodities look attractive. I've been saying that for some time only to see them lag the market or even lose money.

    Posted on July 27, 2015.

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    2 Responses to “Analysis of My Best and Worst Investments”

    1. freebird says:

      I took the opposite approach, my retirement accounts are all in a few mutual funds, but taxable counts I actively manage. My oldest taxable account is what I add money into, my other accounts were split off from this one and were sealed at the open, meaning nothing in or out, only trading. So I can easily track performance for all my taxable accounts except the original one. My oldest sealed account just passed a milestone and has multiplied seven-fold since the end of 1998, so that’s about 12.5% per annum. Not bad considering it’s held between 30-50% cash for the duration (it’s at 50% now).

      Funny, I worked for several years at one of the names you mentioned, but I’ve had lousy luck betting on tech names. What’s given me the best returns has been healthcare. I’d agree with #2 as being key (and if you don’t know how to parse a financial statement, learn how to do this before buying shares), and on #4 I don’t buy anything I’ve actually heard of (don’t let this bias your opinion which should be based entirely upon the numbers).

      I’d agree recent price action suggests potential large gains for energy and natural resource companies that survive the coming downturn. And over in the corner most small banks are quietly on the mend (if you go there, FFIEC call reports are worth a look).

    2. Zee Hamdani says:

      This was an interesting read. I really admire your optimistic approach towards investing. If everyone had the same attitude then maybe the stress involved with investing could be eliminated.

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