In June 2015, I set out on a mission to find 3 businesses listed on the ASX that I could invest in and turbocharge my wealth. After much analysis, the companies below made my shortlist. I seriously considered investing in them, but for reasons which I'll explain, I did not.
Since then, the share prices of these companies have increased so substantially that I would have become very rich had I acted on my instincts.
Here are the 3 stocks I missed out on and the lessons I learned from those mistakes:
- Qantas Airways Limited (ASX: QAN)
In June 2015, the Qantas share price was $3.40. I didn't buy Qantas shares because the airline industry is highly competitive, subject to oil prices which are outside the control of the airlines and Qantas (or any airline for that matter) has no competitive advantage. Many customers will happily switch to the cheapest airline. The Qantas share price has taken off since then and is currently at $6.20, a stunning 82% increase.
Lesson learned
It's important to understand where in the economic cycle an industry is and airlines like Qantas have certainly benefited from lower oil prices. A disciplined and focused management team also makes all the difference. CEO Alan Joyce's focus on cost and debt reduction has allowed the company to resume dividend payments. Sometimes even distressed companies in competitive industries can be great investments when purchased at the right price.
- CSL Limited (ASX: CSL)
In June 2015, CSL was trading $87.77 per share. Whilst CSL is a quality business with a high rate of return on equity, I didn't buy its shares because its price to earnings ratio was significantly higher than the market PE ratio. Today CSL is trading at $136.44, a massive 55.45% increase.
Lesson learned
Often, high-quality businesses will be expensive, but they are expensive for a reason. Warren Buffett said, "it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price".
- REA Group Limited (ASX: REA)
In June 2015, REA had a share price of $38.36. Whilst it also had a high return on equity, I didn't fully understand their revenue model. To me, it seemed like the success of REA depended on the increases in house prices. Now I realise that a distressed housing market could also present opportunities for REA as more properties are put on the market although this is subject to much conjecture. Today REA is trading at $66.89, a whopping 74.37% increase.
Lesson learned
It's important to invest in companies you understand, as well as understanding how changing scenarios could impact the fortunes of the company.
