Learning from mistakes
Don’t forget to join me for this week’s Live Q&A Chat at 2pm EST at https://twc.scutify.com/members/.
I used to beg my TV producers to let me do a weekly segment called “My biggest mistake” where I’d talk to successful money managers and traders about the mistakes they’d learned from in their careers. Learning from other’s mistakes is the easiest way to becoming a better investor and trader. But as we found out, nobody likes to talk on TV about their biggest mistakes.
Some of the costliest and/or most painful mistakes I’ve made in my career on Wall Street over the last twenty years include:
*Buying 50,000 instead of 5,000 shares of Advanced Fiber Communications, a telecom equipment vendor that was later bought by Tellabs. I’d just launched my hedge fund a few weeks before and in the 2 minutes it took to reverse the trade, I lost about 1/2% of my fund’s value. I never made the classic “Fat Finger” mistake again.
*A year later, I flew back from a wedding in Nevis on a red-eye flight where for the first time I’d had flashbacks to 9/11 and some of the horrific scenes I’d lived through that day. Instead of relaxed, I was a sleepless wreck by the end of the trip. I got a call in the cab ride from JFK to my apartment from CNBC asking me to come to the studio to replace a guest who had canceled on them. The cab waited while I ran inside and got cleaned up. When Maria Bartiromo asked me how much money I had under management on air, I got all flustered because my hedge fund was still start-up small (it got much bigger over the five years I had it open). I was very embarrassed and got emails from viewers mocking me.
*A few months later, my hedge fund was heavily invested in those telecom equipment stocks and they were on fire. I was up 25% by the end of January while the broader markets were flat. I sold most of my telecom stocks only to see them crash 50% or more. I started to scaled back into them even though I could have just ridden out the rest of the year in mostly cash and had a guaranteed payday with my 25% YTD gains already. Three weeks later, and I’d scaled back into those telecom stocks as they fell another 10-20% each and I was back fully invested in the hedge fund. When Nortel announced the next morning that they’d been faking their numbers, every stock I owned was down 20-50% when the trading session opened. I made all the losses back and then some but it took a year or two to get back to where I’d been if I’d just stayed in cash.
*A year or so after that, I was trying to invest Netflix when it had fallen 60% from its recent highs. But the guys running the hedge fund next to mine were short Netflix and shorting more and even paying people to sign up for the service and then cancel it, trying to make the company’s churn numbers climb. I put in a bid at $8 to buy my first tranche in NFLX and was looking good as it fell all the way to just under $9 per share. But it stopped right there and doubled, then tripled from that level in the next couple years. It’s now in the $400s range. Oops.
It’s amazing how many mistakes I can list off just the top of my head, personally. Anybody who’s ever run money, started a business, or invested/traded for themselves can do the same. At least if they’re honest with you.
In the latest Cody Underground Podcast, I talk to tech trailblazer @BrianGallo about his biggest mistakes in his career. He’s got a great story about how Facebook’s post-IPO crash almost put him out of business. And he also talks about how to give away your services forever and still get paid, when to sell a stock, and much more. Click here to listen.
A few notes on individual stocks:
$AAPL – downgraded from Buy to Hold at Soc Gen due to “weaker iPhone Average Selling Prices”. Best I can say about that logic is at least it’s contrarian thinking. LOL
AMBA getting back near its all-time highs. Holding it steady.
Splunk SPLK up 3% and up 10% in the last week. Holding it steady as its part of that Network Security basket along with FFIV and PANW.
And finally, a note on the $IBB puts I bought last week. Terrible timing on my part, mea culpa. I’m down on the puts now and I’m just going to continue to hold them as a hedge against a market pullback.
