Not every UK share I buy for my ISA is going to work out. And during my investing career, I’ve certainly had my fair share of stinkers.
Today, I’m reviewing the three biggest detractors in my current portfolio. Do I still believe in them?
Pack your bags
The performance of online holiday firm On the Beach (LSE: OTB) has been disappointing. There was me thinking that the end of the pandemic might see an explosion in ‘revenge spending’ as people emerge from their homes.
To some extent, this is what happened. But then came high inflation and a cost-of-living crisis. These succeeded in pushing the shares down and leaving my position underwater.
To be fair, On the Beach is trading well. The company recently reported half-year revenue of £80.8m. That’s an 11% increase year on year. It also forecast a record summer thanks to a bursting order book.
Surely this makes the stock– at less than 10 times forecast earnings — an absolute steal? It seems the market is unconvinced.
Since the next update (due September) covers that vitally important summer season, I’m staying put. I’m also crossing my fingers that there aren’t any more geopolitical wobbles or inflation spikes in the interim. These could do a lot of damage.
On the Beach is definitely ‘on the naughty step’.
Great company, bad investment?
Another loser has been Vimto owner Nichols (LSE: NICL). Again, a lot of this seems to be down to inflationary pressures.
This is particularly frustrating as this bears all the hallmarks of a ‘quality’ company.
First, it sells low ticket soft drinks that people buy out of habit. This makes earnings fairly predictable.
Second, its got solid fundamentals. It consistently makes great margins on what it sells and, outside of a pandemic, stellar returns on the money it puts to work.
There’s also virtually no debt on its books. Put another way, Nichols should easily survive another period of economic upheaval.
The problem is that these things look priced in (17 times forward earnings). I’m also not seeing anything that will put a rocket under sales in the near future.
I always intend to hold stocks for the long term but Nichol’s time could be up.
Blue sky bet
A third stinker is AIM-listed penny stock Seeing Machines (LSE: SEE). It runs high-tech tracking software that monitors drivers’ levels of fatigue. The goal is to reduce accidents on the roads.
Sounds good, right?
Sadly, it’s been anything but a smooth ride for investors so far. This is despite fairly frequent news on partnerships with major manufacturers.
Now, this was always going to be a risky buy. Growth stocks like this often need regular injections of cash to keep the lights on, regardless of how good its products are.
At least my holding is modest. As always, maintaining a diversified portfolio can help to minimise some of the financial pain that comes with less successful stock picks.
Perhaps the first cut to interest rates may finally spark life in more volatile, small-cap UK shares. Or perhaps confirmation that the company is now at breakeven (expected in 2025) will get things motoring.
I’m loath to cut my position. But a deadline has been set.
