This is one of my favorite mistakes that I have made in my short career in investing. I bought my first set of stocks in 1999, shortly after graduating from high school. I really had no idea what I was doing… but I knew I was ignorant and accepted that I was going to make mistakes. However, these mistakes would become great lessons later in life when the amount of money at stake was much greater. In June 2000, I purchased Trimble, a small company that uses GPS in construction. You can read more about them on their website.
At that time, my primary reason for purchasing Trimble was because Bill Clinton had recently authorized civilian use of GPS. I felt that this was huge and had to find a stock to cash in on this news. I knew I didn’t really want to invest in the more recreational GPS firms. Trimble seemed perfect because it’s applications were more industrial such as construction, agriculture, and military. Unfortunately, I didn’t consider how expensive the stock was – everyone else was looking for a similar company and consequently the stock was overvalued.
Notice in the chart below how I purchased the stock on a peak only to see the price fall dramatically in the following years. The purchase time is indicated by a blue square. I loved to show this chart to get some laughs from my friends. However, I always felt that Trimble was a great company and could never find enough reason to part with the stock. I think this is part courageous and part stupidity because there were times when I had lost over 80% of my original investment. I followed my gut feeling and held on to the stock. As you can see, Trimble has seen an increase in it’s stock price over the past few years and has actually outperformed the S&P 500 during the same time frame. I wish I can give some intellectual basis for why I stuck with Trimble but my decisions were based more on how I felt qualitatively of the company. I thought GPS is a great tool for these industries and Trimble seems to be the only company that is well-positioned in this market. I didn’t crunch any numbers or try to figure out the intrinsic value of the stock. So, I think 95% of this result is just a lucky gamble.
But anyhow, this is one of my early mistakes. I have learned from it – that I should not necessarily buy what’s hot. I also believe that luck had a lot to do with the positive results of this stock and recognize a need to do a more thorough quantitative analysis of my investments.