Selling Mastercard Too Early Cost Me $700,000

I’ll tell you with a personal story:

I found the band Phish in 1992. For me, they had it all: soaring guitar solos, classical-like passages, acoustic piano, crushing drums, thumping bass, and all sprinkled with jazz.

I saw them in May of 1993. They sold out 2,800 seats.

I expected perfection. But only caring about music, the hippy environment didn’t appeal, and some songs were too country. Silly stage antics dumbed-down monster musicianship.

My love grew conflicted.

Then I didn’t like their new albums. They were boring compared to live greatness. Growing impatient, I dropped being a “Phan”, returning every few years, only to drop them again.

During that, venues became huge. I saw a sold-out 2013 show at MSG with capacity of 20,789: 10x larger than my first show. They even played venues of 80,000+ people. They also grew a monster business.

Privately held details are murky, but get this: After 2019, Phish earned more at MSG than most Knicks players ever have: $50+ million. Career ticket sales exceed 11.4 million and $500 million. They have a streaming service selling subscriptions, content, and merchandise. I believe they eclipsed (or soon will) $1 billion of total revenue.

During lockdown, I’d take long bike rides, again rediscovering Phish as the perfect soundtrack. On July 31^st, my son and I saw them in Atlanta. It was a great show, and the scene was crunchy as ever.

Love or hate it, Phish is an outlier. I wish I had stuck with them from the outset, warts and all. My fickleness made me miss their peak years.

It sounds like regretting stocks I sold too early: I’m picky, but too picky can be costly.

My Costly Trade With Mastercard

In October 2007, I took a quick 150% profit in Mastercard (MA). Seeing big money buying, I bought November $150 calls for $11.50.

Below is a chart of my favorite indicator for stocks: Big Money activity. Green bars show outsized trading activity for Mastercard (likely buying). Red is selling. I’ve circled the buy signal that had me near-term bullish on the stock back in 2007:

Source: ww.MAPsignals.com, FactSet

It was a good bet… Mastercard reported earnings on Halloween, shattering expectations; growing sales, earnings, their footprint, and guiding higher. MA gapped higher blowing through the $150 strike price of my calls, closing at $178.10, +25.5% higher than when I bought the options 6 days earlier. My calls surged more than +150% in a week! I couldn’t resist taking the profit… I pocketed my winnings and walked away. I got what I wanted.

Here’s the rub: Mastercard went on to become one of the all-time great outlier stocks. Since I exited that trade the stock is up +2300%.

Nobody goes broke taking a profit, but you don’t get rich leaving 2300% on the table either. In other terms: If I bought 2 calls, I would have made about $3,000 – awesome for a one-week trade.

But had I held 2 calls exercising my right to buy 200 shares of MA at $150, I would have spent $30,000 on the stock. It split 10-for-1 in January of 2014. 200 shares would have become 2,000 shares. Had I held it until today, it would be worth over $724,000.

I literally left a $721,000 profit on the table.

Here’s what I learned: a longer-term investment perspective makes it easier to ignore fluctuations along the way. It brings calm and reduces stress when stocks invariably face pressure.

Here’s the icing on the cake: when COVI-19 rocked markets last year, Mastercard dropped from $347 to $210. A disastrous fall of -40%.

But since the March 2020 low, Mastercard rallied to new highs: a 70+% gain!

Here is the MAPsignals summary of its outlier status. Those blue bars are the times Mastercard stock ranked well on fundamentals and saw Big Money buying in the shares.

Typically, the more the better. Here’s the long-term climb for the stock:

Life, like investing, isn’t perfect but chasing it can cause premature exits, missing the big wins. Phish ticked most boxes but wasn’t perfect. The Mastercard trade seemed perfect for the short-term but I missed the monster move.

The moral of the story is: when life gives you an outlier, have the long view.

Disclosure: the author holds no position in MA at the time of publication.

Learn more about the MAPsignals process here: www.mapsignals.com

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