I sold MXB six hours too early

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Stocks in review week of Dec 16 to Dec 22

1) I bought some MXB shares on Dec 19. After I read its prospectus more carefully, I found two things I don’t like: it will use the proceeds of the IPO ($225 m) and borrow some $425 m to pay the dividend to its parent, Morgan Stanley; Morgan Stanley still controls more than 90% of its share. So I put up a limited sell order at 29.30 for Dec 21.

On Dec 21 the stock opened at $29.50 and had a huge run from 3:00 PM EST till close. It closed at $33.72. This reminded me 3 years ago I sold my 51job (JOBS) two days too early.

Oh well, in stock market there is no “would have”, “should have” etc.

2) Poor Pfizer (NYSE:PFE) shareholders. I bought some PFE shares about 3 years ago in my sharebuilder account, at which time I just started to learn about stock investments. I am still under water after 3+ years. Out of curiosity, I checked its 10 years chart (you can click on the 10y at this google finance chart). From Dec 26 1997 to Dec 21 2007, it lost $1.01 or 4% value in 10 years! I know smart investor will argue PFE pays dividend. But at least we can say “buy and hold” or “buy and hope” is not the best strategy for PFE investors, because there are better alternatives. For instance, Berkshire gained 190% in 10 years.

PFE is not alone. We can see AMR (parent company of American Airlines) which lost 75% of its value, GM lost 55% of its value… all in the same period.

(Isilon Storage, picture from zdnet.com)

3) Home Inns and Isilon: all right, so “buy and hold” big names don’t work? How about smaller names? Such as last year’s best IPO Home Inns (HMIN), according to Renaissance Capital. From Dec 22 2006 to Dec 21 2007 it gain $1.98 or 6% in a year.

Isilon Systems (ISLN) is an online storage company, its customer includes high profile name such as mySpace. It got some warm welcome in its IPO last Dec. But one year later it lost 79% of its value. Similar things can be said to the GSIT (a small semi-conductor IPO) I bought earlier this year.

Conclusion: I think for long term investors, the valuation is the key. Basically if we overpay for some a concept or supposely safe name (think Pfizer, what can go wrong with it), it will take long time for us to break even, if at all possible 🙂

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