Active stock investors inevitably make bad decisions about their stocks sometimes. This is true even for the most respected investors, such as Warren Buffett, who has highlighted several investment mistakes in his shareholder letters over the years.

However, picking a stock that loses almost all of its value is not the only type of mistake, nor is it the most expensive. The biggest mistakes can be made by selling too early. This happened to me with Booking stocks (BKNG 1.66%)then known as Priceline.com.

Today, it is the third most expensive stock in the U.S. markets, trading at about $3,700 per share at the time of writing. Still, it had reached penny stock status during the dot-com bubble before the split, and the stock’s behavior at that time proved to be both an advantage and a disadvantage for my investments.

My Booking Holdings investment

I have been following Booking Holdings since its IPO in March 1999. From a split-adjusted price of $96 per share, it reached a split-adjusted high of $990 per share during the dot-com boom. Since I also believed in this company and its business model, I regretted not buying.

Still, the bursting of the dot-com bubble took its toll on the stock, and by December 2000 it had fallen more than 99% from that peak to a split-adjusted low of just over $6 per share.

Because of my other losses from the dot-com bust at the time, I didn’t act too quickly. However, when I saw the price rise to $18 per share, adjusted for the split, I thought I had a bargain with a positive catalyst and bought 166 shares at that price in early 2001 (1,000 shares at $3 per share before the split).

By the summer of that year, Booking (formerly Priceline) had risen to an adjusted $48 per share, and I was focused on price action rather than fundamentals. I had nearly tripled my investment in a short period of time and decided to lock in my gains by selling the entire position.

Booking Holdings after the sale

Admittedly, the events of the next few years seemed to confirm the “correctness” of my decision.

One event that confirmed this for me was the 6-for-1 stock reverse split in 2003. During the dot-com bubble, numerous companies reverse split to get out of penny stock status, but in almost all cases, this delayed bankruptcies rather than preventing them. Instead of doing due diligence, I simply viewed this as a sign that selling was the right decision.

Additionally, the stock price did not stay above $48 per share consistently until 2007. If I had gotten the shares back sometime during that year, my impulsive decision to sell in 2001 would not have hurt me. However, 2007 was the year Booking stock finally took off. Even at the height of the 2008-2009 financial crisis, it stayed above my sell price and experienced growth reminiscent of the days of the dot-com boom.

If I had held on to my shares (or bought them back soon after), I would own about $614,000 worth of Booking Holdings shares at the time of writing this article!

BKNG data from YCharts.

Lessons from my experience with Booking Holdings

My experience with Booking Holdings shows how important it is to identify a high-quality stock at a low price in a market chaos.

However, the more important and challenging lesson is that it is difficult to hold such a stock in tougher times with the knowledge and discipline required. To hold Booking Holdings shares long enough, I would have had to hold the stock for six years with a small profit and no further growth. In addition, the reverse stock split (a move that still makes no sense to me) would have raised further doubts.

If I had focused on the essentials, I might have noticed that revenues declined between 2000 and 2003 – but they were still well above 1999 levels. The business model was not perfect for that difficult time, but it was already working.

When sales started to grow again after 2003, they increased by double-digit percentages. Since the company also became profitable in 2003, the financials pointed to a later recovery.

Such due diligence is also essential because massive drops in share prices are often a sign of impending insolvency. If there are doubts about a company’s future, its financials will most likely show signs of stability when these arise.

After evaluating my very costly mistake, my advice is to keep an eye on a company’s actual results and prioritize fundamentals over stock performance. Only through such due diligence can one tell the difference between a cheap stock and a company that is likely headed for bankruptcy.