Don’t sweat missing out – Buffett doesn’t

There are two kinds of mistakes you can make in investing: you miss out on a stock that goes up or you buy into a stock that goes down. I’ve had plenty of experience of both and I know which I prefer. You can miss out on hundreds of opportunities and still do well, but back too many duds and you’re sure to do badly.

There are two kinds of mistakes you can make in investing: you miss out on a stock that goes up or you buy into a stock that goes down. I’ve had plenty of experience of both and I know which I prefer. You can miss out on hundreds of opportunities and still do well, but back too many duds and you’re sure to do badly.

Yet we still all bear that terrible human trait of marking ourselves against the competition, and there’s nothing like seeing someone else making money to kick off our greed. The trouble is that worrying too much about missing out will lead you into buying the duds. It’s better to celebrate those missed opportunities and congratulate those that had the fortitude to take them on!

Warren Buffett himself is a master at this, although he’s reached a state of investing zen where he doesn’t even recognise stocks outside his sweet spot as opportunities.

At the Berkshire Hathaway annual meeting in 2012 he noted about Apple and Google that he ‘would not be at all surprised to see them be worth a lot more money 10 years from now but … would not buy either one of them,’ before adding that he ‘sure as hell wouldn’t short them either’.

In a bid to reach this level of indifference, I offer a public cleansing of three of my most notable missed opportunities (there are literally hundreds of others). Feel free to join in the celebration with others (yours – not mine!).

  1. Top of the list is REA Group, which I came close to buying in December 2011 at around $12 before opting instead for ResMed. ResMed has doubled (like much of the market), but REA has almost quadrupled. More than anything I was put off by News Corp’s 60% stake; I’m not sure why, though – now I own News Corp (partly as a back door way into REA – you see how far I have to go with this indifference lark).
  2. The second is Seek, which I started selling in May last year when it passed $10 and got out entirely at $11.51. A couple of profit announcements and some shillyshallying with their overseas businesses and the stock’s worth $17 with power to add. Still, it’s gone now, so I’ll forget all about it.
  3. Last and probably least is Challenger, for which – also in May last year – I proposed a buy price of $3. It’s now up around $8, but I’m fine with that (almost entirely, truly). As I explained back then, its earnings represent a small difference between two large numbers. Over the past year those numbers have gone the right way, and evidently people expect that to continue. I can’t be confident, hence the need for such a big margin of safety – but to borrow from Buffett, I sure as hell wouldn’t short them.

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