To say I am a little excited about this article would be a dramatic understatement.
We tapped the minds of some of our favorite investors and experts to tell us what their biggest investing mistake was and how they fixed it.
Here are the panel of experts…
– David Merkel, Principal of Aleph Investments.
– William Bernstein, Best Selling Author of The Four Pillars of Investing, EfficientFrontier.com.
– Charlie Tian, Founder of GuruFocus.com.
– Todd Sullivan, Co-Founder and General Partner in Rand Strategic Partners.
– Tobias Carlisle, Founder and managing director of Eyquem Investment Management, LLC, serves as portfolio manager of the Eyquem Fund LP.
– Evan Bleker, Author of NetNetHunter.com, Net Net Hunter Newsletter.
– Tim Melvin, Author of TimMelvin.com, Deep Value Letter, Banking on Profits.
– Ben Carlson, Author of AWealthOfCommonSense.com, helps manage an investment portfolio for an endowment fund.
– Nate Tobik, Author of OddBallStocks.com, Founder of CompleteBankData.com
– Dave Waters, Author of OddBallStocks.com, Investment Manager of Alluvial Capital Management.
– Kevin Graham, Author of CanadianValueInvesting.Blogspot.com.
– Lane Sigurd, Author of ReminiscencesOfaStockblogger.com
– Whopper Investments, Author of WhopperInvestments.wordpress.com
The Questions:
* What was your biggest investing mistake?
* What did you do to fix it?
Here's what our expert investors had to say about their mistakes and what they could have done to fix it.
(NOTE: We'd love to hear your biggest mistakes and what you did to fix it. Give us your thoughts in the comments section below).
David Merkel, AlephBlog.com
Biggest Mistake: My biggest mistakes almost always stem from buying companies where the balance sheet is deficient. Once such company was Caldor. Caldor was a discount retailer that was active in the Northeast, but nationally was a poor third to Wal-Mart Stores, Inc. (WMT) and KMart. It came up with the bright idea of expanding the number of stores it had in the mid-90s without raising capital. It even turned down an opportunity to float junk bonds. I remember noting that the leverage seemed high. Still, it seemed very cheap, and one of my favorite value investors, Michael Price, owned a little less than 10% of the common stock. So I bought some, and averaged down three times before the bankruptcy, and one time afterwards, until I learned Michael Price was selling his stake, and when he did so, he did it without any thought of what it would do to the stock price.
How He Could Have Fixed It: There were a number of lessons: 1) Don't average down more than once, and only do so limitedly, without a significant analysis. This is where my portfolio rule seven came from, 2) Don't engage in hero worship, and have initial distrust for single large investors until they prove to be fair to all outside passive minority investors, 3) Avoid overly indebted companies. Avoid asset liability mismatches. Portfolio rule three would have helped me here; 4) Analyze whether management has a decent strategy, particularly when they are up against stronger competition. The broader understanding of portfolio rule six would have steered me clear; 5) Impose a diversification limit. Even though I concentrate positions and industries in my investing, I still have limits. That's another part of rule seven, which limits me from getting too certain.
