Please ensure Javascript is enabled for purposes of website accessibility

What's in Your Anti-Portfolio?

By Dan Newman - Feb 20, 2014 at 11:26AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Have you ever taken the time to look back on your past investing mistakes? Because you should.

With most of us trading stocks online now, checking the performance of your portfolio is easy enough. However, there's another portfolio you should also check out once in awhile, even though it takes just a bit more work to set up. Because with this other portfolio, you can learn how to better invest -- or divest -- for optimum returns.

But before describing how to go about setting up this other portfolio, or anti-portfolio, let's discuss one of the more famous anti-portfolios run by Bessemer Venture Partners, or BVP.

A long history of missing fantastic investments
In 1901, J. P. Morgan bought out Carnegie Steel for $480 million, allowing him to create United States Steel Corporation (X -2.02%). Henry Phipps, Jr., the lesser-known co-founder of Carnegie Steel, took his share of proceeds and created BVP to begin investing in other entrepreneurs. Since then, BVP has been a part of 108 IPOs and invested in newer companies like LinkedIn (LNKD.DL), Skype, and Staples (SPLS), as well as old-timers including the company that eventually became Intel (INTC 0.05%).

BVP is extremely successful at picking winners. For example, its $12.8 million investment in LinkedIn was worth $430 million after LinkedIn had its IPO. And since that IPO in 2011, LinkedIn has more than quadrupled its revenue per quarter, with $447 million in the last quarter of its fiscal 2013. LinkedIn has also grown its membership from about 100 million in 2011 to 277 million today. BVP was able to identify its potential extremely early, investing in LinkedIn in 2006.

But while BVP has been a part of many fantastic investments, it has screwed up spectacularly as well -- and it openly admits this in its own anti-portfolio. This portfolio of could-have-beens includes early investment opportunities in Apple (AAPL 0.00%), eBay (EBAY -2.83%)FedEx (FDX -1.14%), and Google (GOOGL -1.81%), all of which BVP passed on. As BVP partner David Cowan said of eBay: "Stamps? Coins? Comic books? You've got to be kidding, no-brainer pass."

By keeping this anti-portfolio, BVP keeps itself grounded. And BVP can look back on these mistakes, notice trends, alter its strategy, and learn from all of this in order to perform better in the future.

Your own anti-portfolio
Investing in stocks is a bit different from venture capital, so an individual investor's anti-portfolio won't be filled with missed opportunities like BVP's -- otherwise, that might include the several thousand stocks that can be publicly traded. You probably already have a watchlist of stocks, alerting you to changes of what you could own.

For an individual investor, the real missed opportunity is selling before you should. How can you fine-tune your selling behavior? Simple.

Every time you sell a stock, create a holding in a portfolio of the same amount and price that you've sold (there are plenty of free online portfolio services). Then, look back on this portfolio once a month or so. If these holdings trend positive above a benchmark like the market's performance, you've likely sold too soon. If this happens, check your reasoning why you sold that stock, and alter your future behavior to attempt to fix that mistake. On the other hand, if these holdings perform worse than your benchmark or the market, then congratulations! You sold at the right time. And even though you made the right decision, still go back and check your reasoning to see what you might want to repeat in the future.

Improving your investing
Many people just throw money in and out of stocks without tracking their reasoning or performance outside of what gets automatically tracked by their brokerage. They score some wins, and suffer some losses, without taking any lessons from either. Take a page from the century-old BVP, and improve your investing skills.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

LinkedIn Corporation Stock Quote
LinkedIn Corporation
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,316.67 (-1.81%) $-42.83
Apple Inc. Stock Quote
Apple Inc.
$141.66 (0.00%) $0.00
eBay Inc. Stock Quote
eBay Inc.
$44.38 (-2.83%) $-1.29
Intel Corporation Stock Quote
Intel Corporation
$38.63 (0.05%) $0.02
Staples, Inc. Stock Quote
Staples, Inc.
FedEx Corporation Stock Quote
FedEx Corporation
$240.47 (-1.14%) $-2.77
United States Steel Corporation Stock Quote
United States Steel Corporation
$19.44 (-2.02%) $0.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.