"In buying businesses, I've made some terrible mistakes, both of commission and omission."
--Warren Buffett, 2003 letter to shareholders

Even the smartest investors make mistakes. We Fools are certainly no exception. While we try our hardest to make the best decisions possible, we know that we will make our fair share of errors.

Looking back on 2016, I'm generally happy with the investing decisions I've made. However, the biggest mistake I made this year was an act of omission: I failed to take advantage of buying a great business at a great price.

Here's what happened.

Image source: Getty Images.

An opportunity in plain sight

I cover the healthcare sector here at The Motley Fool, which regularly exposes me to a huge number of companies from the biotechnology sector. These stocks tend to be very high-risk, but they offer explosive upside potential if everything goes according to plan.

Of course, developing new drugs from scratch is expensive, time-consuming, and risky. As such, the vast majority of biotechnology stocks that I research are burning through capital and face long odds of success. However, there are a handful of biotech stocks that have crossed the finish line with their innovative new drugs and have started to generate revenue and profits. These companies are rare, so when I find one, I take note.

Image Source: Medivation.

Medivation was such a company. This cancer-focused biotech had succeeded in bringing a drug called Xtandi to market as a treatment for metastatic castration-resistant prostate cancer. Medivation launched Xtandi for sale in 2012 with its partner Astellas Pharma, and it was rapidly becoming a top-selling drug. Sales were growing so fast that Medivation had turned highly profitable.

Better yet, the odds looked good that the company's strong growth rates would continue for the foreseeable future. Medivation was researching Xtandi for label expansion claims and indications, which included breast cancer. In addition, the company boasted an appealing pipeline of products that were in mid- to late-stage development.

And yet, despite its fast growth and long-term potential, Medivation's shares had actually declined in 2015. That left shares trading for roughly 34 times trailing earnings at the end of the year, which was quite cheap for such a fast-growing company. As a result, I actually highlighted Medivation as my favorite biotech stock to buy heading into 2016. At the time, shares were trading for about $44.

Big pharma catches on

Fast forward a few months, and Medivation's shares started to take off. The reason? Big pharma companies had taken notice of the company's rapid growth and wanted a piece of the action.

French pharma giant Sanofi (NASDAQ:SNY) was so enamored of Medivation that it made an offer to acquire the company outright for $9.3 billion. Medivation wound up rejecting the offer, stating it wasn't anywhere near high enough to reflect the company's growth prospects. And yet, Sanofi wanted to acquire Medivation so badly that it tried to replace Medivation's board of directors to get the deal pushed through. 

Image Source: Getty Images.

Shareholders wound up rejecting Sanofi's offer, but that didn't keep the company's stock from roaring higher. A few months later, Medivation announced that it had accepted a buyout offer, but this time from Pfizer (NYSE:PFE).

The price? A cool $14 billion, or $81.50 per share.

Sucking my thumb

Given my conviction for the company's stock and the huge premium paid by Pfizer to get the deal done, you'd think that I'd be doing victory laps over the news. That would have been true if I had ever gotten around to buying shares myself. Unfortunately, I never took my own advice to buy shares, which caused me to miss out on one of the best stocks of 2016.

Lesson learned: If I see a profitable, fast-growing company that is temporarily trading at a discounted price, then I shouldn't waste time. I should step in, buy shares, and hope for the best.

You can bet that I won't be making that mistake again.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.