Hi, my name is Toby, and I'm addicted to virtual stock picking. Some of you may know me as TMFSmashy, my Motley Fool CAPS alter ego.
Back in May, I ran a pair of articles in tribute to my 1,000th outperform/underperform call in CAPS. On this final day of 2008, I'm rapidly approaching 1,500 picks. Clearly, I'm not on the road to recovery.
This seems as good a time as any to pause and reflect on my performance. Overall, I'm thrilled, having lifted my score by several thousand points and my accuracy above 72%. I even managed to crack the elite ranks of the top 50 players, out of more than 125,000 total.
But I'm not here to brag. I made some boneheaded moves, too, and those are what I want to focus on. It's the only way I can keep improving as an investor, both in CAPS and in real life.
Thus, I present to you three things I fumbled:
No. 1: Abandoning ship
Stepping through the calls I ended this year, there are countless examples of companies that proceeded to implode after I removed my red thumb (that's an underperform call, for the uninitiated). Some examples include Interoil (AMEX: IOC ) , New Gold (AMEX: NGD ) , and Amkor Technology. The share prices temporarily headed higher, and I got spooked out of my positions. The lesson here is plain: Know your stocks, so you can invest with conviction. That holds equally true whether you're taking a long or a short position.
No. 2: Getting greedy
With shares plunging left and right, it became tempting to pile onto these firms on the downside. This can be just as damaging as chasing a stock that's screaming higher, thanks to the infamous short squeeze phenomenon. One situation in which I got burned was an October underperform call on Cheniere Energy (AMEX: LNG ) . I'd identified Cheniere's issues all the way back in April, which was the vastly superior time to call an underperform on this liquefied natural gas infrastructure player.
No. 3: Clinging to old beliefs
This is a classic psychological issue in investing, and it's well-illustrated by my failure to see the impending doom for energy players once the commodity market cracked in July. As share prices dipped (a prelude to a plunge), I threw my support behind firms like Nabors Industries (NYSE: NBR ) , Helmerich & Payne (NYSE: HP ) , and Newfield Exploration (NYSE: NFX ) , only to see their shares collapse over the ensuing months. I even went in for an extra helping of SandRidge Energy (NYSE: SD ) , a company I'd rightly abandoned in June.
So what was your biggest investing mistake in 2008, in CAPS or otherwise? Let us know in the comments box below.
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