The Stock That Burned Me: Apple

By John Divine | September 17, 2012

You'd be surprised what you discover by going back and looking over all your trades. You'll have at least some hazy memories of your biggest hits and most unforgivable gaffes, but financial statements bring back all the gritty little details, sparing nothing. They get right up in your face and tell you: "This is how much you lost. This is how quickly you lost it." Or, as in the painful case I'm going to share with you, "This is how much money you could have made."

A great buy

Premature sales are missed opportunities, plain and simple. Money that could have been yours never comes, because you sell before shares skyrocket. Now, this has happened to me on more than one occasion, but my No. 1 premature sale, The One That Got Away, was Apple (Nasdaq - AAPL), and it was in 2006.

In February 2006, the Dow Jones (INDEX - ^DJI) was under 11,000, the S&P 500 (INDEX - ^GSPC) was more than 16% below current levels, and Apple stock traded at $66.46 when I first bought into it. The stock had been steadily climbing from lows of less than $7 per share in 2003 -- quite a rally, and a run that caught my eye, attracting me to the stock and the underlying company. As we all know now, the innovation I noticed then ended up continuing, and the company turned out all right.

Followed by an egregious error

The stock continued its rise, and, having traded stocks for about a year by then, naturally I praised my prodigious financial savvy. Three months later I sold all my shares for almost $73 apiece, or nearly 10% more than I bought them for. Not bad, I thought.

But wait! I bought them back a day later when the stock went on sale for a dollar less than my sale price. I would go on to sell them four months later for a $4-per-share gain. I thought I was Gordon Gekko. Those delusions quickly left me, and the next time I bought the stock, it was five years later and it had risen 511% since my first purchase.

Come to think of it, I probably should go to jail, for my sheer stupidity.

The takeaway

So what did I learn from these situations? What can you take away from my missed opportunities? What I learned above all is that patience is a virtue, especially in investing. When you buy into companies that you like, you can't get the jitters and sell on the dips, because they are, by definition, the worst times to sell.

If you like the company and the stock isn't doing well, don't freak out. Go over its financial statements, read its press releases, do some research. Decide whether the company is still as good as you thought it was to begin with. If it is, maybe the market isn't telling you to sell -- perhaps you should think about picking up a few more shares while they're on sale.

In the end, I've learned from experience that it's best to abide by the old Motley Fool rule of thumb: Invest only in companies you'd be comfortable leaving your money in for 10 years. I certainly would be better off if I'd stuck to that principle from the beginning.