I wanted to start the new year without any resolutions but with all the major investment mistakes I made this past year so I can avoid doing them all over again.
I was doing this for myself but then I thought if there is even a single person that could benefit from this then it might be worth sharing it with you here as well.
In this post I’ll try to:
-Go over the major mistakes I made
-Explain why I bought/sold
-Share the lessons learned
Before reading these please remember that I found Saul’s board on Oct/Nov 2020 with zero knowledge, so I consider 2021 my first year of investing. I made many (stupid) mistakes for my own portfolio.
Everyone is different, so a mistake for one might be a success for another. Here I define mistakes as something that shouldn’t be done based on Saul’s knowledgebase no matter if it made me or cost me money.
I still consider myself a lousy investor so take all I say/write with a grain of salt. However, this past year I learned more about investing (and more) than I could have ever hoped for. For this, I’m forever grateful.
Mistake no1: Getting out of Cloudflare (NET) at $80 back in Jan 2021.
Why I sold: because I thought the price was overextended.
What I would have done differently now: trim it instead of selling out completely as the company kept executing as usual.
Lesson learned: as Saul clearly states in the knowledgebase, I should have never sold out just because the price went up. Just trim it if it had grown too much.
Mistake no2: Buying Aterian/Mohawk (ATER/MWK) when supply chain/logistics issues were present across eCommerce.
Why I bought: because Aterian/Mohawk was using AI to identify a need in specific products and then selling them online via marketplaces like Amazon, etc. For a company selling things, its gross profit margin was decent (above 50%). Also, they were growing revenues close to triple digits for quite some time.
What I failed to see is that they were operating in a sector that was facing steep price increases in transportation, had supply chain issues, were burning cash, and were in deep debt that forced them to keep issuing more and more stock to pay this out. Also, they were growing mostly via acquisitions. If you combine all that then it is no wonder that the stock plummeted more than 90% from its peak in 2021.
What I would have done differently now: I wouldn’t have bought it in the first place.
Lesson learned: as Saul clearly states in the knowledgebase, companies that sell things have a disadvantage over companies selling software.
Mistake no3: Buying Lightspeed (LSPD) after I said I would stay away from companies that do a lot of acquisitions because it is harder for me to understand and follow.
Why I bought: because I saw a big opportunity in companies like Lightspeed not only because of the reopening economy but because covid forced all these companies to go digital as well as maintain their physical stores. Customers now want an omnichannel approach where they can do whatever, whenever.
What I would have done differently now: based on my bad experience with ATER/MWK I said that eCommerce was in a bad situation for the foreseeable future but nevertheless I went and bought LSPD. Also, the acquisitions made it a bit more difficult for me to fully understand what was going on. If I had the chance now to do it again, I would have kept my position small or even stayed out completely.
Lesson learned: Lightspeed might have been selling mostly software but most of its customers were selling physical items to the end consumer (retail). This again caused issues with logistics/supply chain. Also, the several acquisitions blurred the picture a little and made it more difficult for me to follow. For this, I will try to stick to clearer stories from now on.
Mistake no4: Buying Slinger Bag (SLBG).
Why I bought: because I thought this was going to be the Peloton of tennis. SLBG was replacing bulky/expensive tennis ball launchers with affordable, light, mobile machines. Also, they came out with an app that uses AI to help players improve their game. They were selling out fast and growing close to triple digits but in reality, they were so small that even the triple-digit growth couldn’t keep up with the high costs of manufacturing, transportation, marketing, and ambassador fees. All this led to a huge debt which pushed them to keep issuing more stock resulting in more and more dilution.
What I would have done differently now: I wouldn’t have bought it.
Lesson learned: here again companies selling things show their inferiority compared to SaaS. I’ll avoid companies selling things from now on.
Mistake no5: letting Upstart (UPST) become such a huge position.
Why I bought: because I saw this as an evergreen opportunity which appeared to me that it was much better than anything else on the market at the time.
What I would have done differently now: I wouldn’t have let it become so big. It was well above 50%. Extremely risky for a non-SaaS or for any single position for that matter.
Lesson learned: as Saul clearly states in the knowledgebase, I shouldn’t have let any position become so huge. I should have trimmed it and kept it within reason.
Here are also some general investment lessons I learned this past year:
-Pure SaaS are much more predictable. No lumpiness. Much smoother trajectory. Easier to track and follow.
-Not selling things is a major advantage. You don’t worry about logistics, supply chain, starting from scratch each and every year, etc.
-Companies growing organically are easier to follow compared to the ones that grow by acquisition. This is also reflected in the stock price.
-Following the company by reading the news/announcements and listening to earnings calls rather than chasing the stock alone helps you learn so much more.
-Keeping a balanced portfolio helps you sleep better at night.
May the new year bring health and wealth to you and your families,
Pavlos
twitter.com/Pavlos__21
[ps: Time and health are our most valuable assets]