Let's face it. Even the best investors make a mistake or two every year. But just because an investor makes a bad decision, or misses a blockbuster opportunity, doesn't mean that there aren't valuable lessons that can be learned. We asked three Motley Fool analysts to tell us what their big investing regret is for 2014. Read on to find out what they learned from their missteps.
In 2013, Keurig saw its stock price rise 73%, and on Jan. 1, 2014, I simply thought I'd missed my opportunity. But that was a terribly short-sighted mistake.
At the beginning of the year it traded at a very reasonable P/E of 22.5, and a forward P/E of 19.7. It had a compelling business model and a powerful brand, and while there were concerns of competition from other market entrants, it still maintained a strong customer base and first-mover advantage.
Yet since the stock had been on an incredible run, I decided not to invest in the company. And to put it bluntly, that was dumb.
Year to date, Keurig has watched its stock price climb nearly 90% after delivering quarter after quarter of strong results. In addition, Coca-Cola (NYSE:KO) has amassed a 16% stake in the company. The year really couldn't have gone much better.
When I looked at Keurig Green Mountain at the beginning of this year, I was too focused on its past, and not its future. And that is an investing mistake I hope to never make again.
Unfortunately, Chuy's lost nearly a third of its market value after it reported dismal third-quarter earnings. Sales rose 20% while net income climbed 10% year over year, but that missed Wall Street expectations by half a million in sales and a penny in earnings. Comparable sales growth only rose 3%, disappointing investors who expected numbers on par with Chipotle Mexican Grill (NYSE:CMG), which reported 20% comparables growth last quarter. Total costs and expenses surged 21% because of higher labor, food, and utility costs. The company also slashed its full-year earnings guidance by $0.09 because of rising costs and food inflation.
The only hope now for Chuy's is to successfully expand across the country. The company has opened 11 new stores in the U.S. over the first three quarters. Last quarter, it added four new restaurants, with two outside Texas. However, we won't get a clearer idea of how these locations are performing until they are included in comparable figures next year. I'm not selling Chuy's yet, but I'd like to see some signs of comparables and cost improvement before adding any more shares.
Dan Caplinger: My biggest regret this year was not having as large a stake in Berkshire Hathaway (NYSE:BRK-B) as I had planned to have when I set up my strategy for the year. Coming into 2014, Berkshire had a reasonably modest valuation of roughly 1.3 times book value, and with Warren Buffett having said that Berkshire would consider share repurchases whenever the stock's value was less than 1.2 times book value, Berkshire seemed to have a reasonably good risk-to-reward proposition. Yet when shares climbed by about 10% in the first quarter, I put most of my Berkshire buying plans on hold as the company's price-to-book ratio climbed. My rationale was that I wanted to get the best bargain possible, and with the perfect moment having passed, I was disappointed not to have taken full advantage.
Throughout the remainder of the year, Berkshire has posted aggressive gains, and it now trades for almost 1.6 times book value, showing just how much further growth potential the insurance-led conglomerate had in its fuel tank. The lesson here is that even when a bargain becomes a bit less attractive, it doesn't mean that the stock is no longer a bargain at all -- and sticking to your guns can be a profitable move.
Dan Caplinger owns shares of Berkshire Hathaway. Leo Sun owns shares of Chuy's Holdings. Patrick Morris owns shares of Berkshire Hathaway and Coca-Cola. The Motley Fool recommends Berkshire Hathaway, Chipotle Mexican Grill, Coca-Cola, and Keurig Green Mountain; owns shares of Berkshire Hathaway and Chipotle Mexican Grill; and has options on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.