Was it luck or was it skill?

As investors, it's the eternal question. Put another way, was your investing process sound or did you just get lucky (or unlucky) with the result?

In my continuing effort to become a better investor -- and to share my experiences so you can avoid my mistakes -- I took a look back on my investment decisions and trades for the last year.

What I found was two actions I am proud of and one action I am less sure of -- the one that lost me 50% in a week!

The two good actions
In investing, as when I'm at the poker table, I find that process-driven patience is rewarded. Over the long run, the more rash my actions, the worse my results.

For most of the year, I maintained my discipline.

Action No. 1 that I took was to be rational about my winning stocks. I evaluated their prospects and held or sold accordingly.

Accenture (NYSE: ACN) has had strong gains since I bought in a few years ago, but its operational gains have kept up with its stock price and it's a company I believe in for the long term. So I took no action and continue to hold it.

On the other hand, I sold about half my shares of Whole Foods (Nasdaq: WFM) and NVIDIA (Nasdaq: NVDA) and all my shares of a small bank. Whole Foods shares have increased a good deal since then, while shares of NVIDIA and the bank have fallen quite a bit.

The results have differed, but in each case, I was following my process. For Whole Foods, I was trimming my position in a richly valued stock I had probably bought too much of originally (I had bought a double position, an action I try to reserve for high-conviction, core stocks like Berkshire Hathaway (NYSE: BRK-B) when they're especially cheap). But I didn't sell all my shares because I believe in Whole Foods' business prospects. I know my own psyche, and selling half allows me to be disciplined and hold my remaining shares without fretting.

For NVIDIA and the small bank, shares had approximately doubled faster than I could have hoped for and I worried about valuation. I only sold half of my NVIDIA shares because, as with Whole Foods, I believed in the business prospects enough to hold at a premium. However, I sold all the bank shares because the business prospects no longer justified the now-doubled valuation.

Action No. 1 involved stocks I already held. Action No. 2 was about being disciplined in my buying process.

In the late-July to early-September time period, the market was tanking due to the botched U.S. budget talks and the resulting U.S. debt downgrade. During that time, I used my "dry powder" cash to pick up individual stocks I'd been waiting for good prices on, including some I already owned.

For those two actions, I'm happy with the process, regardless of the eventual results. For my third action, I'm still trying to figure out if my process was sound.

The action that cost me 50% in a week
One of the stocks I bought back in the July-September swoon was down extra because of its own problems. The stock was Dendreon (Nasdaq: DNDN).

Unlike with bank stocks, I'm no expert in biotechs. But my summary thesis was that the market punished Dendreon too much for weak early sales of its Provenge prostate cancer treatment. The weakness (and subsequent pulling of sales guidance from management) was due to a Medicare reimbursement issue and the company's poor initial response to it. Long story short, I believed both were fixable and that Dendreon's prospects were robust enough to warrant an investment by me.

I bought in at $12.95, which was a third of where it had sat just a day before.

I did my analysis quickly, but that's not the quick movement I regret. Here's where it gets hairy. Shares continued to fall. On Dec. 30, the last trading day of the year, shares sat at $7.58.

Meanwhile, I was looking for losers to sell for tax reasons, and this was my last day to do so for 2011. You see where this is headed.

With the company's official earnings not due till February, I decided to sell my Dendreon shares to lock in a tax benefit and promised to look back into the stock after a month (and wash sale rules) had passed.

I knew there was the possibility of good news rocketing the stock. Biotechs are nothing if not volatile. But I took the bird in the hand. If you've followed the Dendreon story, the company released news of improved sales. So a week after I sold for tax reasons, shares were up 75% from my sell price. Less my tax savings, that's an opportunity cost loss of 50% in a week.

Was that just bad luck or the symptom of a bad process? Honestly, I'm still wrestling with that. I'm open to your thoughts. What I am promising myself, though, is that I won't anchor on the gain I lost. As I had planned when I sold, I will reevaluate Dendreon and consider buying back after a month has passed. Process!

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