After three tests the England Cricket team have already lost the Ashes, it wasn’t too much of a contest. But, there’s still two tests left. Should they just give up and not bother? Of course not, there’s still two tests to prove their mettle, even though there’s no prize to be won.
The same question could be asked of shares that have completely bombed. Shareholders of Retail Food Group Limited (ASX: RFG), Vocus Group Ltd (ASX: VOC), Telstra Corporation Ltd (ASX: TLS), Liquefied Natural Gas Ltd (ASX: LNG), Mcgrath Ltd (ASX: MEA) and Collection House Limited (ASX: CLH) are all likely sitting on significant losses.
So, what should shareholders do in that circumstance? Each company has its own issues, so there’s not one blanket answer. Many investors get sick of seeing the red paper loss in their portfolio and sell, even if that’s not the best course of action.
As hard as it is to remain neutral in our decisions, particularly with ‘crystallising the loss’, you need to think about the shares at their current level. Is there a point of holding on?
Investors should consider if at today’s price the share is likely to beat the market. If it is likely to beat the market, then it could be worth holding onto. If it’s unlikely to be a winner from this price there’s no point holding on for longer.
At $1.63 I’d have said that Retail Food Group was definitely worth holding onto, its underlying earnings should be stronger than what that share price suggests. However, at a price above $2 it’s harder to say. We may not have a good gauge on the business until its report in a couple of months.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Retail Food Group Limited, Telstra Limited, and Vocus Communications Limited. 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.