FR: My Worst Investment Decision

Article: My Worst Investment Decision

Up next in my “Fool Revisited” series was my first attempt at a little longer piece, and an early attempt to define my personal investment philosophy regarding individual stocks. I’m not sure if this was part of a sector week, where I used the automotive industry as an entry point into this particular topic, or if it was a direct assignment on best/worst investment decision.

The investment decision I wrote about was a terrible – in hindsight – to sell a very small stake in Ford (NYSE: F) shortly after the financial crisis in 2008. General Motors and Chrysler were pretty close to bankruptcy, leading to the auto bailouts which saved those companies. Ford was “lucky” to have found bridge funding and avoided bankruptcy, but Chrysler and General Motors did not, leading to an $85 billion “bailout” from the U.S. government.

Ford was linked pretty close to the other companies as part of the “Big Three” U.S. automakers, and its share price suffered. I was new to investing, and I saw this as an opportunity, though I ended up getting pretty spooked when the stock price collapsed a little further. This proved to me that I didn’t really have the stomach for investing at the time, though I still dabbled here and there prior to arriving at the Fool in 2011. It truly was the foundation to my investment philosophy as a long-term investor, an attitude I still try to maintain as I plan to wade back into the market before too long.

Here’s the ancient tweet announcing my article back in the day:

Had an investor purchased and held onto Ford after the publication of my article – which was a lot more neutral about the actual stock but more about having a plan when it came to investing – they would have been better off investing in an S&P 500 index fund. The compound annual growth rate (CAGR) and total growth of Ford was dwarfed by the S&P 500 by a pretty substantial margin from article publication (August 30, 2011) through the end of December 2017:

Stock Start Price End Price CAGR Total Growth Value of $10,000
Ford $8.57 $12.49 6.12% 45.74% $14,574
S&P 500 $1,212,92 $2,673.61 13.27% 120.43% $22,043

Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits

Ford’s stock was heading towards a price valley when I wrote this article, eventually bottoming out in July 2012 at an adjusted price of $7.12 a share. Like the other companies in their industry, Ford is dependent on quality sales numbers from quarter to quarter, and a look at the price chart reflects this. Ford themselves are still an important player in the U.S. automotive industry, and remain a best-selling brand thanks to their line of pickup trucks, the brand that almost led to their bankruptcy nearly 10 years ago. I don’t feel like Ford would be a great investment today, but it does pay out a pretty reasonable dividend if you aren’t terribly concerned with growth. Nevertheless, I still kick myself over selling that little stake in 2009, which would be worth more than 5x as much today. Oh, well.

Until next time…

Disclaimer: I do not own currently own shares in Ford. I also have no plans to purchase shares within the next 60 days in any account in which I manage investment funds. You can read a little about my personal investment philosophy here.

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