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I Made A 100% Gain In 2 Years: It Is The Worst Investing Decision I Have Made

When I started out investing, the concept of value investing that was pioneered by Benjamin Graham played a huge influence on my investments. I was extremely particular about the share price that I would pay for a company’s shares.

I would meticulously calculate the intrinsic value of every company I was interested in. I bought them only when they had a wide margin of safety between my purchase price and my calculated intrinsic value. I would also sell them once they reached my estimation of their intrinsic values.

But, one experience taught me why this method of buying and selling shares constantly, based on my estimation of their intrinsic values, was flawed.

Back in 2011, I found a very interesting company listed on Bursa Malaysia, which is Malaysia’s stock exchange. The company’s business was conducted purely online and it was handling some government-related transactions, such as the renewal of a person’s road taxes or employment pass in the country. I saw the business model as simple and extremely profitable.

The company was essentially a virtual post office and it had the potential to increase its revenue greatly if more and more government departments were to appoint it as their online payments portal provider. I even paid a visit to the company’s headquarters in Kuala Lumpur to find out more about them.

As a strict value investor, I tried valuing the company and estimated that the company was worth around RM1.00 per share at that time. With its share price of around RM0.60 back then, I thought it was a bargain and invested in them.

By 2013, the share price of the company had grown on the back of great earnings results. I sold off my shares in the company at a price of around RM1.20 per share, naturally feeling good about myself for having doubled my investment within two years.

But, the share price of the company only went one way after that: Up. As I write this, the company is trading at a price of RM2.16 per share, and that is after it had gone through two rounds of share splits. After adjusting for all the corporate actions, the share price of the company should be RM8.64 per share; based on my initial investment, I would be sitting on a 13-bagger if I had stayed invested.

Choosing to earn a 100% return has been the worst investment decision I have made.

Foolish Summary

The experience had forced to me review my investment decision-making and made me question myself: Why did I sell shares in a company with a growing business, in a growing sector, and with plenty of room to run? I had to ask too: Is valuation the most important thing in investing?

Ironically, I think the answers could be found from Benjamin Graham, a great investor who placed a serious emphasis on the value of a stock. The intellectual father of investing once wrote that, “Investment is most intelligent when it is most businesslike.” And as a business owner – which is what stock market investors actually are – would I constantly buy and sell my company based on what others are offering me? Or, would I invest in a company with the best potential and stay invested in it for the long-term?

The company I have been sharing here is MyEG Services Bhd (KLSE: 0138.KL). It has taught me the true meaning of what long-term investing is.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any company mentioned.