Austin's July Outlook: "My Greatest Selling Mistake" - 7investing 7investing
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Austin’s July Outlook: “My Greatest Selling Mistake”

Austin describes how Shopify was his greatest selling mistake.

July 13, 2020

Most investors have stories like these about a stock we sold too soon, and it’s important to reflect on them. With many companies hitting all-time-highs recently, it feels like an opportune time to book some profits and call it a “win”. However, in my experience that has been a losing proposition.

Shopify (NYSE: SHOP) was the one that got away.

I first bought shares of Shopify around 2016 and added a few times in 2017 and 2018. If you look at this chart of what $10,000 invested in Shopify in 2015 (a year earlier than my initial purchase) would be worth today you might think I could be retired.

That’s right, $10,000 invested in 2015 is worth $287,610 today. But of course, I didn’t hold my shares. Instead, I sold way, way, way, way, way too early.

My average purchase price was $160.25  and I sold for an average of $202.85, a nice 27% return.

Now let’s put that into real money terms with an initial investment of $10,000.

I would have owned 62 shares and I would have made $2,670 in profit when I sold. This is where it becomes painful to read…

At the close of market Friday, July 18, 2020, Shopify’s share price was $929. That’s 479% higher than my average purchase price.

So my 62 shares would be worth $57,598 today bringing me to a profit of $47,598 which is $44,928 more profit than what I actually made. To make things worse, I owned more than 62 shares so the real-dollar opportunity cost is much higher.

What are my takeaways?

  1. We should invest in great businesses. We’re here to help your find those!
  2. If we’re invested in great businesses that continue to get better, we should almost never sell.
  3. In order to achieve #2, our positions must be small enough to allow us to withstand the volatility that all great businesses’ stock prices experience.
  4. In order to achieve #3 and #2, we should keep an investing journal and write down why we initially invested in a company and why we sold. I didn’t do this with Shopify so I’m not sure why I sold.
  5. In order to achieve #1 through #4, we should tune out daily financial media. Great businesses don’t become great overnight and with very few exceptions (fraud), great businesses don’t turn into bad businesses overnight either.

Here are some resources that are much more helpful than daily financial media:

  1. Company annual reports and investor presentations. These can be found by google searching for “Company name investor relations”.
  2. Jeff Bezos’ Letters to Shareholders – reflections on building one of the largest businesses in the world.
  3. Monthly 7investing recommendation reports (click on a month or company name to see specific reports)
  4. 7investing Advisor & company updates
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