$FB Edition of Letting Winners Run

$FB hit an all-time high today. I’m writing this post to help remind myself to let winners run.

As I wrote in $PTON Edition of Bottom Catching, “It’s a crazy time. We’re amid a pandemic, yet we’re unsure if we’re in a bear or bull market. I keep a daily log of the madness in 2020… Corona Crash or Everything Bubble Pop?” That’s as true today as it was when I wrote it a few weeks ago.

As a reminder, I historically haven’t bought many individual stocks. And I mainly stay away from buying into initial public offerings. I didn’t buy $FB when they went public at $38/share, and I didn’t buy Peloton when they went public at $29/share. I usually don’t buy around IPO day because:

  • I recognize IPO often stands for ” Imaginary profits only” or ” Idiotic, preposterous, and outrageous” or “It’s probably overpriced.” I read Grahams, ‘The Intelligent Investor’ in 2014…
  • I have no idea of a proper valuation.
  • I don’t like buying hyped/consumer names.
  • I usually don’t own too many individual stocks at a given time.

But that doesn’t mean I’m not happy to buy at a price that feels much safer… at a price that seems like a ‘deal.’ That’s usually ~30% lower without any major fundamental reasons for the drop. My price was $18 for $PTON and under $30 for $FB.

I ended up making 2 buys at a price per share average of $23.

I’m not a trader. I don’t buy and sell frequently. I usually don’t hold many individual stocks. But there are exceptions. I told myself that Facebook was different than most– that Facebook is my going to be my Google. I told myself I’d hold it forever. I held strong. But I made my first sale in November 2018, right as stocks began their Q4 dip. I sold a decent amount of equities leading up to this moment because I had been working to position my portfolio more defensively, thinking the bull market was due for a correction. But I think selling is a slippery slope. I held steady for years, but once I made my first sell (25% of my overall holdings), I continued with smaller sales. 4 more— 75% of my original buy. I now hold just 25% of my original purchase. And I got an alert that $FB hit an All-Time High today, at $237.

Here are my main lessons from my experience with $FB:

  • You just know when a company is special. When it’s a once in a decade-like company. When they’re likely going to last a very long time. When they could be like a Google, and when that happens, it’s probably worth owning, especially at a discount from its initial listing price.
  • When you have the conviction that a company is one of those special companies AND when they repeatedly meet or beat expectations, just hold them— let them run. Try to forget about them. And if you want to take some profit then take some. Sell some, once. But know why you’re making that sale. Do what I did in November 2018 by selling 25% of my shares at $173. But let that be it. I didn’t have good reasons for selling 4 more times in the following 1.5 years. My feelings on the fundamentals didn’t change, and I didn’t need to free up that cash. I should still have 75% of my original shares, but instead, I only have 25%, and they just hit an ATH.
  • Don’t sell the remaining 25%. Forget they exist.

I’m not complaining. First world issues. I just think that I made a mistake. I didn’t do what I said I would do, and I didn’t have an excellent reason for doing it. I told myself when I bought them in 2012 that I’ll hold them forever. Nothing should be set in stone, and with investing, you need to be open-minded about change- changing narratives, changing conditions, changing goals, etc… things change. But in the case of $FB, nothing fundamentally did for me. Yet I behaved like something changed by selling.

With all of that being said, there’s a chance I look back in a few years with delight at my decisions. If so, it was all luck. You can’t know for sure if most investment decisions were great or awful without hindsight. $FB may have significantly benefited from the bull market of which it launched into. After all, a group called FAANG dominated the decade, and $FB had something to do with it. Maybe some of FAANG will fall in the next decade. Maybe not. We’ll see.

As I said in my $PTON post:
I’ve captured the story and will try to learn from it. But I won’t dwell. The worst thing that could happen is over-trying to avoid it from happening again.

Ultimately I’m not kicking myself because of 2 solid reasons:

  1. My wife and I are healthy, which is all that matters during a pandemic.
  2. The market is behaving irrationally. I still believe we’ll hit those March [2020] lows again.

2020… Corona Crash or Everything Bubble Pop?

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