One mistake that many investors make, no matter how experienced, is selling certain investments they should have held onto. We asked three of our analysts what stocks they regret selling, and here is what they had to say.
Matt Frankel: One stock that I deeply regret selling too early was Tesla Motors (TSLA -1.11%). I bought in shortly after the IPO, when the stock was trading in the low $20s, and sold when it popped into the $50s in April 2013 thinking I had made a great move.
At the time, the Model S was just gaining traction, and while the reviews were good, it still remained to be seen whether or not Tesla could actually be a profitable company. Well, I think we all know how that played out.
Although I regret selling too soon, I did learn a very valuable lesson from the experience. Tesla was a company I believed in from the start, and on a long-term basis. I completely entered the investment planning to hang on to my shares forever, and I let the prospect of a quick gain cloud my judgment. Nothing had changed in my feelings on the company – it still seemed cheap relative to its long-term potential, and everything was still on the right track.
Regrets like this remind me why it's so important to always think long-term when investing. If you chase short gains, like I did with Tesla, you're more likely to leave a whole lot of your potential profits on the table.
Dan Dzombak: One stock I regret selling is Melco Crown Entertainment (MLCO 0.47%). Melco owns casinos in Macau, the Mecca of gambling for China and South East Asia. I purchased Melco in 2008 in the depths of the financial crisis for $3 to $4 a share when you could buy the company for below its understated book value as the whole gambling industry was in crisis around the world.
Melco's assets included one of the newest casinos in Macau, the Crown Macau, as well as the City of Dreams casino which was scheduled to open June 1, 2009. Macau is just a short flight away from the whole population of China which provided major growth opportunities going forward for Macau as it is the only place in China allowed to have casinos. Further, the government of Macau had announced a hold on new gambling licenses providing a competitive advantage to operators with projects already licensed, which included Melco, providing the company with a large moat.
As the world economy rebounded in 2010 and 2011 on the strength of China, Melco's casinos took off as did the stock. I held onto the stock until early 2013 and sold it around $20 per share to focus on other opportunities as signs pointed to China's economy slowing and the country being in a massive debt bubble. I sold despite Melco looking reasonably valued for a company with some of the best assets in a market that will undoubtedly continue to do very well over the next 10 and 20 years.
Since I sold Melco, the stock doubled again and started paying a dividend. My mistake was selling a reasonably valued stock because of macroeconomic fears that would have taken a few years to play out anyway.
Melco has now come back to $25 a share as gambling revenues are way down in Macau. There is still lots to like about Melco and you may find me owning the shares again sometime soon.
Leo Sun: One stock I sold too early was Visa (V -0.23%). I bought shares on the first day of trading in March 2008 for around $60. The stock slid to the upper $40s and mid-$50s during the nadir of the financial crisis, but I neither sold the stock nor bought more shares.
Instead, I held onto Visa, and it eventually soared as high as $96 in 2010 thanks to robust earnings. But then the news regarding swipe-fee limits hit, and both Visa and MasterCard plunged on fears that their bottom lines would be crushed. Visa bounced back briefly to the mid-$70s, so I sold my shares for a minor gain. But if I had simply done nothing, I could have ridden it to $260.
I initially invested in Visa for two reasons: it had great margins because it only processed payments, and I liked the low risk business model where its partner banks shouldered the risk of defaults. The swipe fee drama blew over with several major settlements, and Visa's profit margin -- which I thought would decline -- surpassed its 2008 and 2009 levels. Lesson learned -- don't prematurely sell a solid stock on a few negative headlines.
