Warren Buffett is famous for his pithy investment quotes and advice, with perhaps the most famous quote of all being something along the lines of: "Rule 1 of investing never lose money, Rule 2 of investing, never forget rule number 1".
Unfortunately, not losing money in the share market is easier said than done and everyone will make mistakes that create capital losses.
Notably, Ben Graham as the "father of value investing" and Warren Buffett's teacher also wrote extensively on the psychology of investing and losses.
In particular Graham noted that losing money in the stock market doesn't automatically mean you're stupid, while making money in the stock market doesn't automatically mean you're smart.
For example two investors could buy the same stock on the same day, for the same price and one lose 50%, while the other doubles their money over 2 years.
The difference being that one investor is letting their investment's behaviour control their own by selling after the stock goes down, while the other is controlling their behaviour to make money and focus on the long term.
As Graham said, make the stock market and its movements your servant not your master.
So it's important to know when you should take a loss and when you should take a long term approach even if the value of your investment has fallen. With that in mind let's take a look at the 10 biggest mid-cap losers of FY 2019 according to Commsec.
Source: Commsec, July 2, 2019.
Nufarm Ltd (ASX: NUF) has been hit by worries over the safety of glyphosate products in the US along with some weaker-than-expected earnings numbers.
Costa Group Ltd (ASX: CGC) handed investors a profit warning in 2019 that it blamed on weaker-than-expected prices for berries, avocados and blueberries, among other problems. As such it showed the risks in its business model.
Challenger Group Ltd (ASX: CGF) recently downgraded its earnings forecasts in part blaming rising risk free interest rates in the U.S. for its annuity products becoming less attractive to Japanese investors. This makes sense and the stock could stay under pressure for a number of reasons.
IOOF Holdings Limited (ASX: IFL) was hit by the Royal Commission and a shock demand from the prudential regulator APRA that a large amount of its senior management team be banned from working on APRA regulated products. No wonder the shares are down.
Adelaide Brighton Ltd (ASX: ABC) is a building materials business that has warned Australia's soft new construction activity and housing markets are likely to hurt its performance.
St Barbara Ltd (ASX: SBM) is the gold miner that had to revise down its FY 2019 production guidance on the back of operating problems at its Gwalia gold mine.
Clydesdale & Yorkshire Bank (ASX: CYB) has historically had a lot of problems added to by Britain's Brexit-hit economy over the last 12 months.
Whitehaven Coal Ltd (ASX: WHC) shares sold for just 50 cents in 2016 and sit at $3.65 today, despite sliding around 37% in FY 2019. As such we can see it's giving back some ground after a hot run powered by rising coal prices.
Blackmores Limited (ASX: BKL) warned investors in April that China sales were slowing due to a number of reasons. No wonder the stock is down 26% over FY 2019.
Pilbara Minerals Limited (ASX: PLS) is a lithium miner hit especially hard over the second half of FY 2019 on the back of falling lithium prices as supply catches up with demand.
Foolish takeaway
We can see there's an eclectic list of companies on the list from diverse sectors to show there's nowhere to hide in the share market.
For shareholders in these companies the important question now is whether to sell, buy more, or hold and take a long-term approach.
Generally, I'd suggest that averaging down into stocks is never a good idea, while the decision to sell or hold should be based on whether or not you expect the stock at its current valuation to be likely to beat the market going forward.
As it stands I am not overly enthused about any of these companies' prospects going forwards and would not buy any of them today.
