Investing takes guts. Even when you've done everything possible to minimize the potential premium associated with risk, purchasing a stock can feel like placing a bet at a casino.
How apropos, considering I'd like to talk about Shuffle Master (NASDAQ:SHFL).
Along with the aforementioned internal visceral material, investing requires one other attribute: a total lack of emotion. Don't misunderstand -- there's nothing wrong with expressing animated excitement about a company and its products, but you can't let that get in the way of sound, logical reasoning. I've never owned Gillette (NYSE:G), for example, but I think its razor blades and various products are quite innovative for their category, and I always marvel at the depth of its marketing skills. It's a great company, one for which I have a lot of respect.
But back to Shuffle Master. It supplies the casino industry with card-shuffling devices and game tables such as Three Card Poker (it recently divested itself of slots). The fundamentals of this company, and the underlying resilience of its stock, can make a grown man cry. They're so beautiful, it's like looking at a favorite crush.
I Foolishly consult Investor's Business Daily on a consistent basis, and I've noticed that Shuffle Master often ranks highly -- and I mean A or better -- in terms of earning per shares, sales, and return on equity. It's in a hot industry and has quality colleagues such as Ameristar Casinos (NASDAQ:ASCA), International Game Technology (NYSE:IGT), and Alliance Gaming (NYSE:AGI).
I used to own Shuffle Master. I bought it a couple of years ago around the mid-teens, and its shares are now trading at $47 a stub. I've never been to a casino in my life, but once again, I didn't need an emotional attachment to the company's products to buy in. It was a spectacular growth story then as it is now. So what did I do?
I sold it at a measly gain of a couple bucks per share. Today, I rue my decision. Why didn't I hold on to it? What was I thinking? I saw the growth rates, I was aware of the relative strength, and I knew of the inexorable, primordial urge to gamble that exists as a hardwired matrix in the back of the human mind. Let me tell you, gambling is going nowhere -- it's a great revenue stream for state and local governments.
Last month, Shuffle Master announced a 3-for-2 stock split. The news reminded me of my long-ago decision to sell, and resurrected the depressive funk like a horrific phoenix from the ashes. The market was choppy at the time, and I felt that I should take the profits and run. I was silly and ignored the fundamentals (that's why I came to the table in the first place, to purchase well-run, cash-generating companies, wasn't it?).
This decision and the resultant lost profits pain me, but like Mr. Spock -- the stoic Vulcan from Star Trek -- I must remain in control of my emotions, ignore what was done in the past, and move on. Whether it's too much zeal for the business itself or the inability to forget an incorrect trade, emotion needs to go. Otherwise, you won't be able to focus on the market and its ever-present collection of opportunities.
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Fool contributor Steven Mallas owns none of the companies mentioned here.
