I can’t help but feel a little bit jealous every time I hear of a company jumping 100% in a year.
I think to myself: “Dammit, why didn’t I see that coming?”
However, there is no place for envy nor jealously in the share market.
As Charlie Munger, one of the world’s greatest investors and Co-Chairman of Berkshire Hathaway says: “It’s the only one of the deadly sins you’re never going to have any fun at, at all.”
Indeed, I’d go so far to say envy is the most dangerous emotion for the lay investor. At least, it will be to your share portfolio.
You see, after we’re done kicking ourselves for missing an opportunity, we’ll go and look into the company. “What does it do? Why did it go up so much?” We’re compelled to investigate a little further.
However, subconsciously, we’re already sold on the prospects of the company. We say to ourselves: “Surely the market knows something I don’t.”
Unfortunately, it’s not that easy to identify potential winners and more often than not some of the high flying stocks of yesterday will fall just as fast. Sometimes faster.
3 companies which could be about to shoot the lights out… again
I was lucky enough to ride the 1,300% gains of LNG liquefaction and tolling facility developer, Liquefied Natural Gas Limited (ASX: LNG) (LNGL) earlier in 2014. However, in the last month alone, shares are down 35%.
Despite the early share price gains and recent setback however, if LNGL can get its Bear Head or Magnolia tolling facility in North America up and running, the current share price will prove cheap. The proposed facilities will turn piped natural gas into LNG for transportation, yet the company will carry no commodity risk because it will charge a tolling fee only.
Whilst I wouldn’t go so far to call LNGL a standout ‘buy’ today, I’ll admit it could shoot the lights out if things go right. Unfortunately shareholders will have to wait until at least 2018 to find out.
Another company loaded with potential, which rose dramatically then fell just as hard, is New Zealand-based cloud accounting software provider XERO FPO NZ (ASX: XRO). In the past 12 months XERO shares are down 55% to $15.24, after reaching a high of $42.96 in March.
The share price fall can be attributed to XERO’s ‘disappointing’ growth in the US market, where bullish investors believe the $1.9 billion company can achieve great things. However it’s worth noting the company is currently experiencing exceptional growth in Australia, the UK and New Zealand.
Moving from most speculative to least. Slater & Gordon Limited (ASX: SGH) is another Australian company trying to take the world by storm. Having climbed 250% in the past three years, the difference between Slater & Gordon versus LNGL and XERO, is it is already profitable. And extremely so.
Slater & Gordon, Australia’s biggest personal injury law firm, is currently expanding into the much larger UK market. In the coming year it expects to draw around 45% of revenues from the new market. Keep an eye on this one.
Buy, Hold, or Sell?
LNGL remains a high-risk/high-reward investment at today’s prices and if you can’t afford to lose the money, don’t buy it. XERO is already making some big (and growing) revenues and at today’s prices I think it’s a worthwhile investment for those willing to accept a high degree of risk. Lastly, despite running hard, I think Slater & Gordon is a standout long-term buy to hold at today’s prices.
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Motley Fool Contributor Owen Raszkiewicz owns shares of Slater & Gordon, Xero and Liquefied Natural Gas Limited. The Motley Fool owns shares of Xero.
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