Investing howlers I have made!!

M

markowitzman

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I think as a word of warning to the novice investors I am starting a thread on howlers I have made in the past.
Unfortunately there are many!
During the early to mid 90s I subscribed to an internet subscription based stock advisory service called www.tokyojoe.com
Joe sent out a number of emails each day recommending purchasing volatile internet stocks with low floats of shares outstanding.
The email would read something like.........
Joe buys 100,000 xyz stock @$3........going to $5....get on it now!
Like crazed maniacs all subscribers then furiously put in buy orders with discount brokers and the price spiked on volume due to the small float and low daily volume. One basically tried to ride the wave and get out before mass selling wave mounted again!
Joe was in a live virtual chat room with all subscribers and basically egged all in sundry on to buy big time.
He only posted the profits and not the losses on the website.
The SEC found he didnot buy the actual shares in many cases but instead on seeing the spike in price due to subscribers buying he SHORTED the stock!!!!!!
For this pleasure one gave Joe $200 per month.
I had level 2 quotes and I could many times not see the individual buy which made me suspicious.
Luckily I did not lose much but what a scam.
Lesson learned.........as much as possible avoid the get rich quick stuff and be wary of internet stock advisory momentum trading stuff as all is not as it appears.
By the way he is still operating!
Have loads of other stuff (sadly!) but just getting the ball rolling.
Maybe by the end of this we may have a list of golden rules or something of that ilk?
 
Three mistakes for me...

Investing in an Equitable Life With Profits bond (after 5 years spanning the GAR debacle I got my nominal sum plus a little back) and single contribution With Profits personal pension plan (bad choice of fund type for a 30 something and bad choice of WP provider in retrospect). I still haven't done anything about the latter investment after all this time...

Frittering away some money that I got from stock options in a company I worked for on some silly daytrading a few years back. I recently transferred the remaining US$300 (from an original amount a lot more than that!) back to my Irish current account. At least I never really had the money in question and could obviously afford to lose it. And it got the daytrading bug out of my system and learned some (expensive!) lessons along the way!

Not selling eircom in the first week or two after the IPO as I said I would!
 
Not howlers but these are the best/worst I've got

Starting a personal pension with Standard Life and putting in a few lump sums before the dotcom crash.

Buying an apartment rather than a house (although it is more life-style convenient).

Buying new cars rather than getting onto the property ladder a couple of years earlier.

Not maximising pension AVCs over the last year as the market recovered.

Picking a deposit only SSIA after the wounded feeling resulting from losing a paper fortune of dotcom share options.

£1000 in prize bonds for eight years without even a whiff of a prize.
 
and theres more!!
bottom fishing
buying a stock that was a basket case that was falling fast (and getting cheaper by the minute in my mind) and had terrible fundamentals.
Trying to catch a falling knife is the technical term I think.
Bought at least three companies that were falling fast and eventually went bust.
I think one should look at fundamentals to assess value rather than price.
 
Being frightened by a stockbroker...

My policy now is to buy a diverse portfolio of stocks and hold them for the long term. But occasionally, I think that a stock might offer some value. One morning I heard the announcement that AIB had putting their ICI subsidiary into liquidation. I couldn't wait until 9am to get onto a stockbroker and buy shares in AIB. My reasoning was very stragtforward, if a company bites the bullet and gets rid of its loss making subsidiaries, its profits will rise. I bought a lot of the shares.

The share price went down in panic reaction to the announcement. When I hadn't got the dealing notes a week later I rang the broker. He had decided not to put my order through as there was so much negative stuff about AIB. He had tried to contact me, but I had moved job and he hadn't got my new number. The price was down by around 10% and so I got frightened by all his talk and decided not to buy. Of course, my initial decision was quite right and AIB recovered and rose to new heights.

So I never listen to stockbrokers any more.
 
Thinking you can be the next Warren Buffett

Although a strong believer that 99.99999% of investors cannot pick winning shares, I read some Buffett stuff about 5 years ago and thought I might give it a go. It's only common sense really, isn't it?

I had shares in CRH at the time and based on my Buffett like analysis, I reckoned they were way overvalued and decided to switch to a share which I cannot even name, as I am too embarrassed about it. Fortunately, it was over the Xmas period and the stock markets were closed. By the time they reopened, common sense had returned and I didn't go ahead. CRH has gone from strength to strength in the mean time... The other company has disappeared.
 
Selling my First Active demutualisation shares once they recovered up to the flotation price. I was so concerned about the totally illogical need not to 'break my duck' of never having lost money on any share, that I jumped straight in & sold once they recovered. They went on to double in value over the next year or so.
 
buying stocks only on the basis of a high dividend yield
one company cut dividends and tanked
I never realised that I should have looked at other parameters like dividend cover cashflow debt and earrnings growth.
I looked at gift horse in the mouth without much else analysis.
I think the stock was Barlo which has now been eaten by P Quinn and co.
Lost over 50% of value due to hanging on from the perspective of the yield.
When yield was cut stock tanked!
 
I don't know if missed opportunities count as 'howlers', but I wish I'd bought two adjacent half-acre sites in a nice area 4 miles from Limerick — former countryside, now becoming a suburb — that were available in 1993 for £10K apiece... :(
 
Not getting a good financial advisor straight away after starting working.
If I had I probably would have saved thousands!
Instead I relied on my own gut feel and the bank's advisor (who is not independent and who was very interested in making sales first and foremost). Lost at least 100k in retirement fund due to having being missold a pension by bank of ireland in the uk. A good and honest financial advisor would have saved me from this loss.
 
My first experience of buying shares was Buying 500 Quids worth of Arcon shares in 1996. The Share price doubled in a year and I sold out chuffed with myself. Within 12 Months of the sale the share price halved and there was a Buy report in the Indo. Thinking this was like taking candy from a Baby I invested the 1000 back into Arcon. But spent the next 2 years watching it all reduce to approx 150 Quid.

My best buy (but could have been so much better) was definitely Anglo Irish bank which I bought ( spent a few bob more than Arcon) in 1999 for 2.70 per share .Sold them in 2004 when the price was 14.00 (before the share split). But since then they have on kept climbing and climbing. Warren Buffetts theory of never selling is definitely the best policy.
 
- taking a recommendation from a broker that a particular stock is doing well & about to do a 3 way split & would likely take off again.....eeehhh it did split 3 way, dropped by about 20-25% straightafter and has perfomed miserably since.......... one of my first ever stock purchases.... now just treating it as a granny stock

- being 'conned' by an inlaw to buying an investment policy he was an agent for many many years ago...who sort of avoided telling me about the managment charges ie that my 1st year of contributions were going to the company...when I went to cash in to contribute to putting a deposit on a house (about 10 yrs ago).... I had lost about £1k....quite significant then believe me.

- Eircom.... in hindsight the lesson there was not to cash out shortly after the floatation when the share price did do well (I still have not learned for it though!!!)

.... and that's the tip of the iceberg.

ninsaga
 
buying stocks i knew nothing about (apart from ticker!)
There are many spam emails knocking around pushing otcbb nasdaq stocks which are highly volatile microcaps.
These emails are "free" and promise you that the xyz stock is to be the new microsoft.
I bought a couple of these and needless to say I lost my pants!
So avoid all these free investment recommendation and stock tips on the internet. As you buy these stocks the chaps that sent you the email are selling them to you. They also often get a kickback from the company if the stock spikes as directors of company can sell overvalued stock also.
All this is at your expense which puts the "free" element of the "service" into context!
 
And to expand on the point a bit more during the tech bust I rang my broker in order to buy dell at $12. I had a relation working in the company and he said they were never as busy and he could not understand why the stock had fell so much. He also was aware tht the company was expanding production. None of this was insider info.
Anyway broler warned me that the consensus of earning expectations for dell was very flat and he advised me to avoid the stock. I was advised to go into some tech thing I knew nothing about and you know what happened next!!!!!!!
Dell gose to $40plus and tech company went wallop and brought me with it!
So buy what you know and take earnings projections, broker buy or strong buy ratings on stocks with the pinch of salt.
Be especially careful if the broker giving the buy rating is the designated broker for the company.
Invariably some of the brokers can have an overhang of stock that they want to offload and the best way to get rid of it is to sell it to the small investor under the guise of a buy or strong buy rating.
 
Imagine holding Anglo for years, started buying a 50p up to £2.50 where they held for years. Got frustrated and swopped the lot for AIB. What a plonker, dumb-assed decision. Of course, pride prevented me buying back in after 9/11 when they fell to €4.50. Couldn't admit I was wrong.

Lesson: sentiment/personal feelings have no place in investment.

BTW, I have a nice line of framed Waterford wedgwood certs that I can offer AAMers at a small discount because it's still near christmas!

Wasted years on Michael I'm so wonderful Smurfit.

Still bought on the sound of gunfire in 1991 and have enjoyed the up and down ride since then.

I like buying value cheaply and holding. Having swopped gold for fool's gold a few times, I'm learning some lessons the hard way.

Not in Warren's league yet but striving. Good luck to all AAMer investors. There's an angle every day/week - the trick is to be able to spot it and have the firepower to ACT on it. Enough said
 
If we are including missed opportunities then not buying a second house soon after we bought our PPR is one in hindsight. My father used to piss me off saying that every time I'd meet him for a pint! I'm sure that I and everybody else would have an endless list of possible missed opportunities - especially with the benefit of hindsight...

On a more positive note it's good to see that most people have learned something from their mistakes. I know that I have - e.g. having not bitten the bullet with a quick post IPO eircom sale I now tend to cash my ESPP shares in and secure the c. 15% gross return there and then rather than holding and thereby putting two eggs (i.e. my job and some direct share investments) in one basket (i.e. the company/industry in which I am employed). The way I look at it is that if I was to go out looking for a company/share to invest in my employer (third or fourth player in its semiconductor industry niche and with some odd fundamentals - e.g. an astronomical PE ratio) would not be the first on my list so better to treat the ESPP as a savings scheme, the discounted price as a bonus, cash it in and look for another home for the money.

You live - and make mistakes - and learn. :)
 
A friend of mine rode Baltimore technologies from pennies to becoming a millionaire (paper unfortunately!) back to pennies again without selling a share.
That is pain in the pit of the belly stuff!
 
Those of us who have invested in the stock market for some years are very happy with the returns we have made. Ups and downs, but I reckon around 10% a year over the last 20 years or so.

So it was really galling for us, to have kids coming along, who knew nothing about anything, making shed loads on Baltimore, amazon.com, lastminute.com and all these other shares. We tried in vain to point out that this was a huge bubble. We tried to point out that you cannot rewrite the rules of investing. We implored them to read about previous bubbles such as Tulipmania. But they would not listen. They told us that it was a "new paradigm", that we did not understand the new technology. They told us that Warren Buffett was old school. Read the archives of the Motley Fool to see the rubbish that was written. My own favourite was a comment on Askaboutmoney from a guy who was describing his own investments: "One more share split and I will pay off my mortgage". Share prices were so high, that companies were simply dividing their shares into units of 10, so that a share which was priced at $100 would be reduced to 10 shares of $10. But that is not what happened. Even a roumour of a share split would drive the price up by 30%.

It was terrible knowing you were right and all these guys were wrong, but I was only watching from the sides. Some fund managers who refused to participate in the dot.com bubble dropped right down to the bottom of the performance charts and lost significant clients and ultimately, their jobs.

Anyway, I stuck to my policy of buying and holding a diverse portfolio of non-tech shares. I had shares in Fyffes which announced that they were going to particpate in the dot.com boom by setting up Worldof Fruit.com.
The shares took off from €1 to €2. €1 was about right. I reckoned that €2 was a crazy price and considered selling. But I was defending the Efficient Markets Hypothesis on Askaboutmoney, so I held onto my shares. The dot.com bubble was now going on for a long time. I was sure that there was nothing to it, but just in case, it did no harm to have shares in a company which participated in it. And it was only a smallish part of my portfolio.

They rose to €3 which gave me mixed emotions. I was glad I had not sold at €2, but I should definitely sell now. I didn't. They rose to €4 and I just didn't get around to selling them.

The dot.com bubble crashed and the share dropped to 80 cents.

Lesson
The market is efficient over the longer term, but occasionally it demonstrably goes crazy. Take advantage of this when you can.

Of course, it sounds easy in retrospect. But when should I have sold? I first seriously thought of selling at €2. If I had done so, I would have been kicking myself when they rose to €4 but would have been delighted with myself when they dropped to 80cents.

They are back up to around €2.50 these days and I still have them. If I had sold out at €2 and bought into one of the rising stars at the time, I would be better off. But I could have used the proceeds to buy a share which has done worse than Fyffes.

So I suppose the lesson is - don't take any action when a stock or the stockmarket is overpriced or way overpriced. But when it's way, way, way overpriced - forget the Efficient Markets Hypothesis.

Brendan
 
ClubMan

You make a good point about your own experience and about Baltimore employees. It also applies to Elan, Iona and lots of other Irish employees.

Reduce your exposure to your employer's shares if they form a significant part of your overall wealth. I suspect the failure to do by most people has probably been the greatest investment howler in Ireland over the past few years. The destruction of wealth for a significant number of people has probably been greater than the failure to sell eircom shares after the flotation.

Brendan
 
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