Wednesday, April 30, 1997
I sold Coke for
3Com
or
If I Didn't Do Stupid
Things
I Would have Much Less to Write About
by
TMF Runkle
Last week I got in a lot of trouble with my wife. She didn't catch me cheating on her; it was worse. She discovered I sold half my Coke stock and bought... 3Com. The horror of it all. It was not a pleasant evening. First, she asked me why I sold Coke. Well, I was ready for that. Coke is trading at an ultra-high PE, far ahead of its normal range. It was certainly overvalued. I felt pretty safe on that.
My wife wasn't going to let me off that easy. How much did I sell the stock for? $57 a share. What was it going for at the present? I patiently explained to Barbara that we weren't talking about that right now. "OK," she said, "how far did you expect it to go down?" I was sure it was going to go to $45, well maybe $50 a share. That was what I calculated as its fair value. A possible 18% loss in value! Barbara wants me to mention that's a short-term loss; Coke has 120 some years of increasing earnings and share price. I don't think that's important, but I put it in to make her happy.
Barbara then fought dirty. "How much did 3Com go down after you bought it?" Women, always changing the subject. This was beyond the subject of our conversation, and I don't really think anybody is really interested in that type of thing. Besides, how was I to know 3Com would drop another 30% after I bought it? How could I know that Intel would go head to head with it, dropping prices, introducing new products and all that?
By now my wife was getting a little angry. She brought all kinds of things that really had no place in the discussion (some women will do that). She mentioned that I should have known Intel had 3Com in its sights after it dropped prices on interface cards and the stock price fell the first time. She also pointed out that I paid commissions selling the Coke stock, buying the 3Com, and selling the 3Com when I got disgusted. That of course added to the 30% or so loss of my money. We didn't really need to get into that. Barbara, pouring salt on an open wound, had to mention I lost over 30% of my investment to avoid losing 18%.
Unless you think I'm utterly defenseless, I brought up some things, too. Like the money she lost in Rubbermaid. I think she lost about $100 or so there. How much have I lost on the market? As I said, Barbara lost about $100 in Rubbermaid. Also, she has a mutual fund that has stayed flat! She did come back with some lame arguments, like how she has bought Intel, Johnson & Johnson, and Procter and Gamble. Never argue with a woman; it's hopeless. How has she done overall in her portfolio? That's not the subject of this Fribble, because we aren't talking about that either.
Is there a moral to this Fribble? Yeah, don't tell your wife you sold Coca-Cola. Also, consider the worst that can happen if you continue to hold a stock. Hopefully, Intel won't get into the cola business, so Coke is probably safe right now. Of course, if Intel puts cola on a chip, like they've put everything else on a chip, Coke has serious problems. The companies in the high tech area are engaged in cutthroat competition, so any investment in them carries a much greater risk. Pulling some of my funds out of Coke may not have been a bad idea; it was taking up too large a position of my portfolio. However, taking that cash and putting it into a stock on its way down isn't the best way to diversify. Unless you are following the advice in an earlier Fribble of mine, How To Lose Your Money Easily.
As for my marriage, it seems to be recovering. After an appropriate amount of groveling, and promising I'd never do such a thing again, I was forgiven. I knew that approach would work; it did when I lost half my money in the networking software company I knew nothing about, the Internet provider that tanked, and the construction company that "recapitalized." Experience is a good teacher. You just have to learn the right lessons from the experience.
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