Merck (NYSE:MRK) was one of the earliest investors in Moderna (NASDAQ:MRNA), buying a position in the biotech even before it went public in late 2018. Earlier this month, though, Merck announced that it had sold all of its shares of Moderna, making a sizable profit. In this Motley Fool Live video recorded on Dec. 9, 2020, Healthcare and Cannabis Bureau Chief Corinne Cardina and writer Keith Speights discuss why it appears that Merck made a mistake by selling its Moderna stake.

Corinne Cardina: Another headline that investors have made a lot of noise about is Merck selling its stake in Moderna. Can you tell us why they had a stake in the first place, and whether this is a sign that Moderna shares are overvalued, considering that they're up nearly 700% year to date?

Keith Speights: Merck has owned a stake in Moderna for several years. Then when Moderna went public in late 2018, they upped their stake even more. They've made a lot of money off that investment. They didn't come out and just say, "Hey, here's exactly why we sold our stake." But they did point out that they've got a great return over those few years. That's why they sold. They took profit off the table.

I wrote an article about this when it broke, and Merck revealed that they sold their entire stake in Moderna by mid-fourth quarter. Mid-fourth quarter is Nov. 15, right? Just looking at the calendar. Well, since Nov. 15, Moderna stock is up close to 90%. Merck took profits off the table, but they left a lot of profits on the table.

I think that's the risk here for investors. In fact, I would say my biggest mistake as an investor has been to sell too soon. I would suspect that if we called Motley Fool writers and editors and members, that would probably be a common thing, that I just sold that stock too soon.

I personally believe that Merck sold Moderna too soon. I think it's obvious that they did, because the stock continued to rise after they sold. I think they were looking maybe at the short term, just locking in those profits rather than the long-term potential for Moderna.

Cardina: Absolutely. Investors maybe don't read into that -- could've been a mistake.

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.