While I was fond of the business, I was not convinced that it would succeed and beat the market for my portfolio.
Specifically, I felt that increases in the price of pulp (tissue raw material) or costs relating to a weaker Australian dollar (pulp is priced in US dollars on global markets) would increase the cost of operating the business.
I also didn’t think that Asaleo Care would be able to pass on those costs to their customers given the retail wars between Coles (which is owned by Wesfarmers Ltd (ASX: WES)) and Woolworths Group Ltd (ASX: WOW) who have significant bargaining power.
So how has that decision worked?
Since then, shares in Asaleo Care are down 53%. I certainly did not think the shares would drop that much, but with the benefit of hindsight, it’s not all too surprising given the headwinds the business has faced.
Meanwhile, the prices of the other shares I considered as better alternatives at the time are up an average of 18%:
- ResMed Inc. (CHESS) (ASX: RMD) – up 31%
- Magellan Global Trust (ASX: MGG) – up 6%
- Reece Ltd (ASX: REH) – up 18%
Not flashy returns but still better than seeing your investment cut in half and I’ll happily take an average performance of 18% every year.
So what are the lessons? For me there are a couple:
- Buy and hold remains my preferred strategy but if the investment thesis has clearly deteriorated then I should be prepared to sell
- Before getting into the numerical details of PE ratios and share prices, it’s important to understand the business, its industry and how it will deliver shareholder value
If your portfolio needs a boost, then you will want to read this report about a little-owned stock our team of experts has discovered.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
You can find Kevin on Twitter @KevinGandiya.
The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia has recommended ResMed Inc. 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 Scott Phillips.
- Warren Buffett is buying banks – should you too? – November 16, 2018 10:34am
- Telstra CFO to replace Elon Musk as Chair on Tesla Board – November 9, 2018 11:08am
- 5 ASX shares that I think are your best bet on Melbourne Cup Day – November 6, 2018 7:00am