That’s right. I made almost 70% on my investment on MWC on its peak when the water company went down to more than 40% in a single day. When I posted the analysis on MWC, it was still a good buy and you too could have gotten in and made more than 30 – 40% on your money following my thesis.
I also saw a lot of smart traders who went in and made money on MWC and sold at a profit at 10 to 11. Kudos to them.
There might be some similarities why smart traders and value investors seem to buy the same investment at the same time. Part of it because its obviously cheap and part of it because they are able to handle the emotions that comes with the stock market. Technical Analysis are just icing on the cake.
But that is only where the similarities lie and where the difference begins. A trader likes his profits quick. An investor likes the business.
So even if the traders sold at a profit of lets say 70% in this instance, an investor would still hold on to the asset.
Does that even makes sense? Why would you not want a 70% gain on your investment for a few days?
It makes sense to compound your money fast by buying and selling. But an investor is not entirely interested in buying and selling of stocks. What an investor wants is the accumulation of great assets.
This is the kind of dialogue that I hear inside my head everytime I made a big hit on an investment. The temptation to sell is strong because of the big gain. And the regret is also strong when the 70% gain becomes a 50% gain.
But I always remind myself that the game is not to get the higher yield on the investment. That is the by product of the process. The process is to buy cheap and great companies and hold them forever until they became bad business or it gives you a reason to sell. This reason is not about price, but business reasons.
I have Apple stocks in my “personal” account. I bought it at $60 per share. Just weeks before Buffett bought into the company. The temptation to sell at $120 is high. At $200 its even higher. Today Apple sits at $309. I have made more than 400% on that investment. And you can imagine how hard it is for me to NOT SELL the stock thinking that the US stock market is so much overvalued.
When I made 70% gain on MWC, bells started ringing. I can already see where my next vacation will be. How much the gain can sustain us without having to work for years. Then it went to 60% then 50%. Its time to remind myself of the goal. The goal is to buy businesses and hold them for the long term. And besides, I don’t even know where to put it once I sell it and turn it into cash.
“Pera na naging bato pa.”
“Gain is a gain.”
This is a time when you think traders are right when they say it. But we have to remind ourselves that we are investors. We don’t play the zero sum game. We play the positive sum game. We wait for value to accumulate on our shares of the company. We enjoy the dividends it gives us. We enjoy slowly building wealth.
Slow may not give much excitement to people. Especially this generation where everything is instant. But I would cast my bet among the investors, where I can just forget everything after I buy an asset and hold for it for the long term. I don’t have to watch the price on a screen like a trader does. I can increase my knowledge by having to read books because of the free time I have being an investor. And knowledge will lead us (or not) to new possible investment.
I like the process. I don’t have to stay in front of the computer waiting for the price which I can sell at maximum profit. I can just be an investor, buy the stock, hold on to it, and while I hold on to those great assets, I can read a book. Life is perfect.