Why Making Money Hurts (Sometimes)

Written by Charles Mizrahi
Posted December 7, 2017

I couldn’t believe how much money I'd left on the table!

I grabbed the nearest trashcan — I was about to puke.

I'd spent 10 weeks researching the company...

After reading the company’s annual reports and speaking with customers, I'd left no stone unturned.

I was ready to pull the trigger.

I don’t recall how many shares I'd bought, but it made up around 10% of my portfolio. It was a position that I had a lot of conviction in.

Expeditors International of Washington (EXPD) is a great company. It moves cargo all around the world for its customers and all without owning its own aircrafts, ships, or trucks.

In the industry, EXPD is called "asset light."

Expeditors has an edge over its competition. The company has a huge global presence, extensive relationships, and its boots on the ground in six continents.

And EXPD also has the two things that I look for in every potential investment: It's very profitable and had no debt...

Not a Fan of Wall Street

At the time, EXPD was run by CEO Peter Rose. The company only paid him a $110,000 salary. If he wanted to make more money, the company had to make more money. Pretty simple formula.

Rose and his management team — in addition to their low salaries — received a bonus of 10% of operating income. In some years, their bonuses amounted to millions of dollars. Pretty simple formula.

Rose focused on his business and wasn’t a fan of Wall Street.

The company didn’t have conference calls with young analysts who were fresh out of college and asked stupid questions.

Rose was firm: no conference calls with Wall Street analysts and no giving access to any information about the company. All questions about the company had to be sent in by email or fax. The guy was prickly and plain spoken.

Once, a shareholder asked about access to management, and Rose answered: "Your investment club has the same access to management information as do any of the big guys. No one gets an advantage here.”

He let the performance of the company do the talking.

A plain-spoken CEO with a track record of success and a company that made money? This was turning into a winning combination. The more I learned about Expeditors, the more I liked it.

It had the smell of a “no sweat” trade — a trade that wouldn’t cause me to sweat before I started making money...

It Was Time to Pull the Trigger

The way I figured it, the stock was worth at least $20–$22 per share.

However, Mr. Market didn’t agree. He was offering the stock at $12 per share. That price was simply too cheap.

Mr. Market was pricing in a slowdown in the economy after 9/11, which would end up lasting for years. But I didn’t believe it. The facts didn’t bear that out. In fact, the economy was starting to show signs of strength.

I starting buying at the end of October 2002 at $12 a share. By the time I'd finished adding to my position, my cost was $13.50 per share.

Investing is a lot like flying a plane: “Hours of boredom punctuated by minutes of terror." The buying and selling are the hard parts. Once in the trade, there’s not much else to do.

The hard part was over.

Over the next few years, the company continued performing well, and the stock price moved higher. I was right, and Mr. Market was wrong. I started looking to exit the trade.

Warren Buffett says the key to success is to be “greedy when others are fearful, and fearful when others are greedy.”

Expeditors was no longer selling at a bargain price. Mr. Market was pricing the stock for perfection, and greed was overtaking fear.

I placed my order to sell at the close of trading on May 3, 2006. The stock closed at $38 per share.

I made more than 400% on the trade.

Not bad for making one decision a little less than four years earlier.

While I was taking a mental victory lap, Expeditors announced earnings after the close. Just a few minutes after I sold it.

The results were better than expected — much better.

The stock exploded higher. It was up more than 20% in after-hours trading.

I felt like I was going to vomit...

Suck It Up and Move On

I’m not going to lie — it hurt, and it hurt badly.

I had a 400% gain in my pocket, but I wanted more.

I knew from years of trading that you never plan to sell on the high tick or to buy on the low tick. And here I was, kicking myself over having missed out on an easy 20% gain.

I took a few breaths and knew I had to speak with someone. As much as I kept saying that it didn't matter, it sure as hell did.

I reached for the phone and called someone who had been trading for more than 40 years — "Max." He managed a few billion dollars in his mutual fund.

Morningstar had given his fund five stars for more years than I could remember. He was also my go-to guy whenever I needed a shot in the arm.

When I called Max, I must have sounded really bad on the phone. “Who died?” he asked.

After I told him about the 400% gain, followed by selling out seconds before a 20% up move, he laughed.

“It’s supposed to hurt, Charles. This game ain’t easy. You always want more. But you did the right thing. You bought right and made a nice return. Suck it up and move on.” And then the phone went dead.

I didn’t feel that much better, but Max was right...

The Sting of Missing Out Hurts, But…

There’s an old saying on the Street: “Never complain about a profit.”

But sure enough, here I was, complaining about a return that anybody in their right mind would love to boast about.

But not me.

After a while, the sting of missing out on more returns went away. And that’s when I thought about what Warren Buffett — my investing hero — might say to me if he were standing in front of me:

Charles, if you wait and try to sell at the very top to squeeze every last cent of profit, you’ll lose. Nobody can predict the future. It’s a fool’s errand. It was a great investment. You earned a great profit. It’s time to forget about it and move on…

And I did. After all, Wall Street wasn’t about to feel sorry for me — that’s not how it works.

So, the next day, I went to my office to research my next winner.

My next investment was good but not as good as Expeditors.

I think it only doubled over the next two years. Nothing to sneeze at, but I'd had much higher hopes for it.

Investing is a marathon, not a sprint. The goal is to rack up a bunch of winners and to do it over long periods of time.

I've had to come to terms with not being able to get every last drop of profits out of every trade.

I’ve been doing this for more than 35 years, but I’m still learning — still researching. Constantly working to find the best companies that'll make unbelievable returns. 

Which is why I want to share my research with you. So you can earn those type of profits, too.

For the past 10 years, I've been following a company that'll do just that. It's returned its investors over 550%. And even more returns are on the horizon.

This is your opportunity. And your chance to boast about the money you'll make. 

I've compiled all of my research into a report. Learn everything you need to know. Click here to access it.

Report: 5 Simple Rules
for Investing in a Bear Market