Outpriced

My dumbest investment was buying shares of Priceline Group for around $16 soon after the company’s initial public offering (IPO) — and then selling them for $160 apiece just a few months later.

— R., online

The Fool responds:

That certainly seems like an excellent dumb investment, since your investment apparently increased in value tenfold! But we know what you mean, since the stock has risen a lot since then — with a recent price of around $2,175. (That reflects a 2003 1-for-6 reverse split, so a comparable, split-adjusted price for you would be about $362 — which still stings.)

You were lucky to get your shares at their initial price of $16 per share, since it’s typically just well-connected people and institutions who get those shares in an IPO, with the rest of us scrambling to buy in the open market, often after the price has surged. Priceline’s shares began trading at $81, reflecting an immediate 500 percent gain — though they ended their first day

around $69.

In general, it’s best to avoid IPOs entirely, giving them a year or two to settle down. Many will end up at lower prices.

Note that Priceline bought the European hotel booking site Booking.com in 2005, and it has been so successful that it’s now the company’s biggest brand and profit generator, so much so that Priceline Group recently renamed itself Booking Holdings.