Here at The Motley Fool, we subscribe to the 80/20 rule in investing. Namely, 20% of the holdings in a portfolio are responsible for 80% of the portfolio’s growth. Inevitably, this means that — put mildly — some of the stocks we buy don’t live up to the expectations we had originally invested in them.
Since selling is half of the investing equation, we asked some of our contract writers to share some of the lessons they’ve learned over the years!
Arrival
What it does: Arrival is a British electric vehicle manufacturer that plans to revolutionise the production of EVs with its cost-effective micro factory model.
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By John Choong. Like many SPACs and IPOs during the bull market of late 2020 and 2021 promising sky-high achievements and billions in profits, Arrival (NASDAQ:ARVL) was no different. The company had IPO’d at a premium of over $20 at that time, promising billions in profits by 2025 with production no where in sight. Mistakenly at that time, I started a sizeable position, attracted by the allure of potentially doubling or even tripling my money.
How wrong I was as the firm burned through cash faster than a race car burns through fuel. Consequently, Arrival had to conduct multiple capital raises along with numerous project delays. The result of all of this is that its share price is now down by a heart-wrenching 99% from its IPO levels.
Since then, the group is yet to produce a single vehicle for public use and could run out of cash before the year ends. This was an expensive lesson in taking valuation models seriously. That said, if Arrival can secure additional funding and make good on its promises, the upside potential from its current share price could be massive.
John Choong has no position in any of the shares mentioned.
boohoo
What it does: boohoo is a British online fashion company that owns a number of brands.
By Edward Sheldon, CFA. Right now, there are a number of stocks in my portfolio that I wish I’d never bought. But one, in particular, that’s worth highlighting is boohoo (LSE: BOO). I bought this stock in an effort to capitalise on the global online shopping boom. Currently, I’m down about 80% on my investment.
The good news is that I’ve learned a few valuable lessons from my losses here. One is that it’s really important to focus on a company’s ‘economic moat’. Can it do something that other companies can’t?
In boohoo’s case, it became apparent last year that the company didn’t have that much of a moat because Chinese rival Shein was able to capture significant market share from the British company quite easily.
Another lesson is that if a stock’s short interest increases significantly (as boohoo’s did last year), it’s often just sensible to sell it. Rising short interest indicates that sophisticated institutional investors are increasing their bets against the stock.
Can boohoo shares bounce back? It’s possible. It does own some powerful brands such as PrettyLittleThing and Debenhams. And supply chain/inflation issues that have plagued the company in recent years should start to moderate soon. I’m not expecting to break even any time soon, however.
Edward Sheldon owns shares in boohoo.
boohoo
What it does: boohoo is an online fashion retailer, targeting younger buyers in the UK.
By Alan Oscroft. Shares in boohoo (LSE:BOO) are down around 80% in five years, and have lost almost 90% of their value since a peak in 2020.
So what do you do when shares you own fall in price, and you think they look cheap? Well, I bought more. And then watched them drop even further.
I didn’t think the company’s troubles would turn out so bad. But what does it look like today?
It’s difficult to put a valuation on the shares right now, as analysts expect earnings losses for the next couple of years. On a price to book value basis of around 1.25, the stock could be good value, though.
For the year just ended, revenue fell 11%. It was still up 43% since 2020, and the firm did report positive adjusted EBITDA. It looks like there’s sufficient liquidity too.
I’m tempted to buy more, again. But I’ll resist, and just keep watching.
Alan Oscroft owns boohoo shares.
boohoo
What it does: boohoo designs and sells clothing, shoes, accessories and beauty products
By Paul Summers: Things have been pretty awful for online retailers over the last couple of years. One high-profile victim of multiple economic headwinds, including the cost-for-living crisis, has been boohoo (LSE: BOO). Corporate governance concerns haven’t helped either.
Sadly, all this has led to it becoming by far my worst-performing holding.
On a positive note, boohoo still has net cash and is trading in line with guidance. Looking ahead, a new US distribution centre will drive efficiencies and help reduce customer waiting times. Supply chain costs are also expected to be lower.
But a recovery will take time. Profitability has dived and I’m struggling to see how it will return to levels seen during the boom years.
As a Fool, I always try to take a long-term approach to investing. However, my patience is being sorely tested here. The next update will probably determine whether it stays in my portfolio.
Paul Summers owns shares in boohoo.
Butterfly Network
What it does: Butterfly Network makes portable handheld ultrasound devices and associated software.
By Ben McPoland. There are many shares I wish I’d never bought, but Butterfly Network (NYSE: BFLY) springs to mind instantly.
Why do I regret this one? Well, a painful 84% drop in the value of my investment is one BIG reason why. A quick check of my ISA informs me that after a couple of years my £500 investment is now worth just £80. Ouch!
Now, I’ve made poor investments before and I’m certain I will again. But why this shocker grates on me is because I bought into a story (and seemingly not much else).
The story was that Butterfly’s portable ultrasound-on-a-chip device would essentially replace the doctor’s antiquated stethoscope. Medical practitioners would increasingly use Butterfly’s ultrasound, as well pregnant women at home, and growth would skyrocket.
While that may eventually turn out to be true, the firm’s sales growth has stalled while big losses continue. The CEO left last year. So I’m hanging on to my shares more in hope than expectation nowadays.
Ben McPoland owns shares in Butterfly Network.
