Warren Buffett — arguably the best investor of all time — is often quoted saying that his investment mistakes were a case of 'omission' rather than 'commission'. We all have a story of the one we missed out on. Here's mine.
The time was around July 2011. Believing that the worst of the global financial crisis of 2008 was over, I went on a hunt for value in the market. There was a lot out there, but it didn't take long to find SEEK Limited (ASX: SEK).
SEEK ticked a lot of boxes; a disruptor in the job classifieds space, it quickly became a leader in Australia and New Zealand. It has a strong leadership team, manageable debt and a very solid international expansion strategy. Through acquisition it established a presence in Mexico, Brazil, southeast Asia and China with a number one or two position in the job classifieds market. To top it all off, the share price was a sensible $5.10 per share.
What was there not to like? I bought into the stock. Being a happy shareholder, I continued watching the company and liked where it was going, but then it all came apart.
When emotions get in the way of your investment thesis
The continued negativity in the news about Europe and talk of a looming double-dip recession made me question my investment thesis, and I convinced myself to sell SEEK at a price of $6.36. This is a decision that still pains me today.
Not long after that, the share price started an upward trajectory and SEEK kept delivering results. The price has more than tripled in two-and-a-half years, to $16.28 today.
Every time I am on a SEEK website, the memory of the winner I gave away comes back. When you look for a job, where do most people look? Seek.com.au. If I was looking to buy a small business, my natural inclination would be to browse seekcommercial.com.au, a subsidiary of SEEK Limited.
These days SEEK is trading on a juicy price-to-earnings (P/E) ratio of around 28 and no longer offers a comfortable margin of safety. If a jittery market was to bring the P/E ratio down below 20, I would look for an entry point, but for now, I'd suggest adding SEEK to your watchlist.
Foolish takeaway
Don't let your emotions come between you and your investment thesis. If you have done your research well and the company's future looks bright, do not get distracted by speculation; trust your research. Emotions can make you buy and sell at the wrong times, which in turn will hurt your overall investment returns.
