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Mistakes and lessons: a novice's entry to invest in the trillion dollar companies

In 1997 I heard about wireless technology, I started to follow QCOM stock and I was going to buy it when it shows any movement. Before I buy it, it skyrocketed making me numb. I could not touch it anymore.

When Google went IPO I was in love with the company, I heard founders had 10 times more voting power,their IPO system is unheard of; I could not buy.
 
lesson: go with your conviction.

When BIDU went IPO, Goldman started to say how expensive it was. Given its china dominance and 2-3B valuation was actually a great buy. I learnt sometimes analysts could be wrong and you have to go with your guts and by that time BIDU was heating up to 300.

lesson:
Read the analysis for key information, their analysis and conclusion may be twisted.

When housing price was heating up, I believed the bloggers story of housing bubble. I bought some put options of bank stocks to hedge against my buys in technology stocks  and I also bought a low priced home to hedge against my bank puts. My bank puts were giving me 3x-4x returns and I was stuck with a home that I was not able to sell so easily. On 2007/2008 stock market tanked and my bank put options of less than 5 thousands dollars were not enough to cover my losses in the home purchase and technology. I realized that technology will recover but I am stuck with the house.

lesson:
Never buy assets like houses which you have to manage for hedging. Hedging should be based on value. Think long term when hedging.

My stock picks BIDU, GOOG, AMZN, AAPL, HPQ, IBM they were all excellent picks. I started to reads motley fools small cap treasures. People were making money on china small caps [the supposed next BIDU]. Before I know it my money got stuck into useless china and india stocks with low PE and high growth recommended by top fools. Even when economy recovered those noname stocks did not recover. My profits were eaten up by stocks with no names, accounting scandals and miss guided earnings forecast.

lesson:
Story of the company is more important than PE, PEG etc. ALN will not be BIDU, if it was BIDU you would know it by name and stories.

Current investment idea:
Market is already ripe for a pullback. I still cannot see any sell side investment idea for me. My three key themes are technology, metals and emerging markets. I do not need to hedge my tech investments with investments in retail, oil or utilities because I would not know the whole story behind those stocks. Small cap jewels are staying private. Big or mid caps are just fine for growth compared with unknown small caps. AAPL is growing like anything as a big cap company. Another myth is that a company has to invest in an area where they are dominant. Market would be slow to reward when a company like GOOG invest in the car technology. [I remember reading an interview by Dan Avida(ex CEO of Decru) where he said you can acquire knowledge, not business ideas. For the most part that is true for individual employees as well. We can learn new technologies, not imaginations or openness to new ideas]. Market is always looking for a new idea,the next best thing. When a company invests in the next best thing, the market is worried about wastage. When the next best thing happens, market has no way to calculate its value. This is where the opportunity is. I believe we will see trillion dollar companies in next five to seven years.  



Disclosure: GOOG, BIDU, AMZN, AAPL, FCX, CTRP,