“What good is envy? It’s the one sin you can’t have any fun at” – Charlie Munger.
With Christmas little more than a month away, many investors will soon be reviewing their share portfolios’ performance in 2014 and looking further afield into 2015. Indeed, the Christmas break is a great time to get up to speed on everything investing and set some goals for the ensuing year.
For investors in the sharemarket, that can mean populating new ideas, exiting losing positions, doubling down on cheap stocks or moving into a managed fund, to save yourself the hassle.
Whatever you do, it’s important to regularly review your performance and write down your observations. Otherwise, more likely than not, you’ll end up repeating the same mistakes.
After all avoiding mistakes is equally, if not more important than making winning stock picks.
With that in mind, here are five stocks I’m avoiding leading into 2015.
1 & 2: No doubt Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) are two of Australia’s biggest and best public companies. However, in the current low interest rate environment their valuations have become eye watering, to say the least. Their shares trade on a price to tangible book value of 3.29 and 2.7, respectively, and price earnings ratios of 15.2 and 13.3.
For the record, I believe each bank is extremely profitability and boasts a wide economic moat. However, no stock is a buy at any price and so long as they trade at today’s levels, I’ll be avoiding them.
3: No surprises with this one but in the next year I’ll be avoiding all junior and mid-tier iron ore miners, including Fortescue Metals Group Limited (ASX: FMG). Like all small and mid-tier producers, it has no demand side competitive advantage. With the iron ore price dropping 40% in 2014 and some analysts tipping it’ll go lower, an investment in Fortescue is not one for the feint-hearted.
4: Ten Network Holdings Limited (ASX: TEN) appeared on my avoidance list last year and has drifted marginally lower, down 2% (although it has also issued 44 million additional shares). Whilst Ten could go on to turnaround its operations or even be taken over by a host of billionaires, I believe there are better opportunities on the market for the purposes of speculation.
5: Qantas Airways Limited (ASX: QAN) shares have risen 51% in the past year, despite posting a 128.5 cents per share loss recently. According to Morningstar, analysts are forecasting modest earnings per share growth in the near-term. However as Richard Branson famously surmised:“I’ve always said the easiest way to become a millionaire is to start out as a billionaire and then invest into the airline business.”
By choosing to avoid these five stocks, I may go on to miss some of the gains that an investor with a greater appetitive for risk could recognise. But that’s OK because I wouldn’t be comfortable holding any of these stocks during a market decline. Indeed, when there are plenty of better investment opportunities available (see below), there’s no reason for me to risk it.
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Returns as of 6th October 2020
Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.
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