My worst stock tips of 2019, and how to avoid them

Here are three of the stocks I got seriously wrong in 2019, and what mistakes I made.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

At this time of year it’s nice to look back on the best investing picks we made during the year, but I like to keep myself humble and focus on my worst too.

Big hole

That’s all I’ve got to show for my investment in Sirius Minerals (LSE: SXX) – part ownership of a big hole, which might turn out to be worth precisely nothing. As things are, it’s worth very little, and though I bought my shares at a significantly lower price than many, I’m still looking at an 80% loss. Thankfully, I knew it was risky and I only invested a small amount of money. 

With its vast potash deposits, I saw the company sitting on a hugely valuable asset, but the value of something like that when it’s still down in the earth is very different from its value when dug up and loaded into shipping containers.

I thought the difference in value would be plenty to get big investors ready to stump up the development cash needed, but sadly it hasn’t turned out that way.

How could you have avoided my mistake? Other than just never listening to me (which itself might be wise), the obvious answer is don’t buy jam-tomorrow companies that aren’t making money today.

Online shopping

In January, looking at the tie-up between Marks & Spencer and Ocado (LSE: OCDO), I saw no justification for the latter’s soaring share price, going as far as to suggest we could even see an Ocado share price crash in 2019.

That prediction was perhaps not quite as accurate as it might have been, as the Ocado share price is up 50% so far in 2019. What did I get wrong?

For one thing, at the start of the year I was still seeing Ocado as essentially just an online supermarket, while many investors had seen beyond that to the provider of automated warehousing and stock picking technology that is the Ocado Solutions division. And that shines a whole new light on the firm.

Being such an early mover, Ocado has become a one-stop shop for retailers wanting to set up or expand, and the latest deal with Japan’s Aeon is a great example.

I still think Ocado shares are too expensive, mind.

Fallen hero

I cringe when I read what I wrote in June about Neil Woodford. I suggested that if you’re considering investing in Woodford Patient Capital Trust (LSE: WPCT), which was on a discount of 33% at the time, it should be based your trust in Woodford’s stock picking ability. And I said “I still think he’s very good at the job.” Ouch.

Since then, the Woodford Equity Income Fund has been closed, and Woodford has been sacked as the manager of Woodford Patient Capital. And the trust’s share price has fallen a further 43%.

The discount to net asset value (NAV) is up to 70% now, though NAV has been downgraded several times since then, and investors fear there will be more to come when the fund’s new managers take over and unwind the bulk of Woodford’s unquoted and illiquid positions.

The lesson? Don’t invest in falling stocks until their troubles are over and you see clear signs of recovery.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft owns shares of Sirius Minerals. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Happy parents playing with little kids riding in box
Investing Articles

2 FTSE 250 dividend growth stocks I’m considering for passive income

Paul Summers thinks the best dividend stocks to buy are those that consistently return more money to investors every year.

Read more »

Investing Articles

The Compass Group share price looks ready for growth after positive 2024 results

The Compass Group share price is up 4% today following positive full-year results. Our writer considers its prospects in 2025…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

How I plan to build an £86k yearly second income in the stock market

Is it realistic to aim for a substantial future second income by investing in high-quality shares? This writer firmly believes…

Read more »

Investing Articles

Here’s the Vodafone share price forecast up to 2027

Can anything stop the Vodafone share price slide? It's still early days for the company's turnaround plan, so we might…

Read more »

Investing Articles

Down 37%, here’s one of my favourite FTSE 100 bargain shares to consider

This FTSE 100 retailer's shares have collapsed in 2024. Despite tough trading conditions, is now the time to consider buying…

Read more »

Investing Articles

Which do I like best today, Nvidia or Tesla stock?

EV maker Tesla stock is on the up, while Nvidia growth is softening a bit. But they're both in the…

Read more »

Investing Articles

After jumping 15%, my favourite FTSE 250 stock looks set for the premier league

Games Workshop stock recently reached an all-time high, placing it within touching distance of promotion from the FTSE 250.

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

1 top growth stock on my Christmas buy list!

Ben McPoland reveals one top-notch growth stock down 29% that he plans to stuff into his portfolio in time for…

Read more »