It takes a strong stomach to be able to survive in the share market.
While it is capable of generating huge returns for investors over time, the market is also known for its volatile – and even gut-wrenching – performances, which can unnerve even the most experienced investors, from time to time.
Peter Lynch famously said, “In this business, if you’re good, you’re right six times out of ten.” While we’re all prone to a losing investment every now and then, some can be far more painful than others.
Consider these 10 shares, which have all collapsed in price since the beginning of the year:
|Company||Current Market Cap||Decline (YTD)|
|1-Page Ltd (ASX: 1PG)||$67.7 million||87.5%|
|Surfstitch Group Ltd (ASX: SRF)||$66.4 million||87.4%|
|Wellard Ltd (ASX: WLD)||$176 million||68.2%|
|Simonds Group Ltd (ASX: SIO)||$48.2 million||64%|
|Future Fibre Technologies Ltd (ASX: FFT)||$55.1 million||60.9%|
|3P Learning Ltd (ASX: 3PL)||$111.9 million||60%|
|Virgin Australia Holdings Ltd (ASX: VAH)||$870.8 million||52.8%|
|Slater & Gordon Limited (ASX: SGH)||$139.2 million||52.1%|
|Neuren Pharmaceuticals Ltd (ASX: NEU)||$98.6 million||51.3%|
|Cardno Limited (ASX: CDD)||$275.2 million||50.4%|
Data provided by S&P Global Market Intelligence
Topping the list is 1-Page Ltd, a company that is striving to revolutionise the way in which companies hire and promote new talent.
It’s a solid concept and the company’s customer base is made up of some of the world’s biggest companies, but the group still has very low revenue and cash flows from operations. Although it does have plenty of cash on the balance sheet, investors are becoming impatient and may be starting to doubt the company’s prospects (I sold my shares recently, although I do intend to keep an eye on the business in case of improvements).
Surfstitch Group has also been an incredibly disappointing investment for shareholders, plagued by several earnings downgrades and the loss of its CEO and, more recently, its chairman as well.
Other big-name businesses that many investors will have been hurt by include Virgin Australia and Slater & Gordon, together with 3P Learning.
Indeed, there are some names on this list that investors could easily have avoided. I myself owned a small parcel of 1-Page shares as a speculative bet, although hindsight tells me I should have at least waited for more positive revenue generation from the business before pulling the trigger.
Other bets, including 3P Learning, would have been more difficult to avoid. The company was showing some nice growth figures, although that quickly changed following an earnings downgrade and the shock resignation of its CEO.
There are a few lessons to take away from this list of non-performers. Firstly, it is imperative that you diversify your portfolio. If a company makes up, say, 1% or 2% of your entire portfolio (as 1-Page did with me), a hefty loss on that one stock won’t cause too much damage to your overall wealth, compared to a situation in which an individual holding made up 40% or 50% of your wealth.
It’s also important to do your own due diligence on all companies you’re interested in owning, and ensure you’re aware of both the risks and the opportunities. If you’re not comfortable with the risks, it may be worth looking elsewhere to park your funds.
The market is full of high-quality businesses that investors should own, as well as plenty they should avoid. You’ll find a full rundown of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an “emergency low.” Simply click here to uncover these stocks.
Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.