My stock picking days are finally over, for now. Back in April 2003, I bought my first stock -- Pre Paid Legal Service (PPD). Over the six and half years since, I bought a total of 33 stocks. As late as May, I was sitting on almost quarter-a-million portfolio of individual stocks, including many financial stocks (AIG, BAC, JPM, LFG, MMC, WTM, just to name a few) -- what a good portfolio it was in a financial crisis :-)
And with the market testing new lows every other day, my portfolio was taking one nosedive after another. For a moment I was in denial, and hesitated to share the losing record, especially to a special reader of my blog -- my wife. Knowing that we won't touch on the investment portfolio for at least a decade, and stock market will surely recover in the long run, I felt it was not necessary to create a lot of anxiety under the same roof.
In retrospect, the biggest lesson I learned from loading more and more financial stocks between 2007 and 2008 is: I acted blindly. With 60-hour work weeks, I should have known that I cannot dedicate enough time to study each company and keep track of all developments. My corporate finance background should have helped me, but without a lot of time to study my portfolio holdings as much as I study the corporate P&L I'm managing, it is no surprise that I chose the wrong path.
I'm still self forgiving -- after all, many professionals paid to do all the stock research fell to the same value traps of the financial companies. (Dodge & Cox, Third Avenue, Bill Miller, etc.)
Anyway, I gradually sold one stock after another, and sold all my remaining holdings of Bank of America (BAC) and JP Morgan (JPM) in December. Today, I only hold onto one stock: Berkshire Hathaway Inc. (BRK.B).
Still, if I haven't made it clear, I still own a lot of stocks indirectly thru mutual funds. I chose to be light on equity investments -- currently having as much as 70% of my portfolio in cash -- but I'm establishing automatic investment plans to invest into mutual funds on a weekly basis. More on this in a separate post.
So the record for my imperfect six-and-half-year stock picking career:
- Companies went belly up (or almost):
○ Beyond.com (BYND) - an online electronics retailer that went down in the .com crash in 2001
○ NetBank (NTBK) - the online banking pioneer that went out of business in 2003
○ Orthodontic Centers of Americas (OCA) - An orthodontic chain running out of cash in 2005
○ LandAmerica Financial Group (LFG) - a title insurance company that declared bankruptcy after a failed merger. (2008)
- Biggest losers:
○ American International Group (AIG) - $23,863 loss (not dead, but next to worthless)
○ Citigroup (C) - $16,531 loss (no more off-balance-sheet SPV please)
○ Americas Express Co. (AXP) - $13,976 loss (yet another financial company -- will credit card default be the next shoe to drop?)
- Biggest winners
○ Apollo Group (APOL) - $14,449 gain (the online university is gaining steam in the recession)
○ Pre Paid Legal Services (PPD) - $10,793 gain (my first stock pick is a winner!)
○ Altria Group (MO) - $2,550 gain (I don't smoke, but tobacco company is still a cash cow)