It's a fact that the share market carries a lot of risk and it's possible to blow up 50% or more of your capital in a short time even if you buy credible companies listed on Australia's leading S&P/ ASX200 (ASX: XJO).
Every regular investor will have losers in the market with the key being to know whether or not to sell, or hold onto losers in the expectation that they can turn around.
While 'averaging down' on losing shares is not a strategy I'd recommend and one of the commonest mistakes made by inexperienced investors.
However, sometimes it's worth hanging on to a 'loser' if a company's problems are 'one offs', 'temporary' or related to macro-economic or political factors that may be beyond its control. In these kind of examples the shares may be cheap.
However, if a company is facing structural problems and has been falling for a period of 2 to 3 years you should probably think about moving on. As Warren Buffett said 'turnarounds seldom turn'. And not for nothing.
With this in mind let's take a look at the 1o worst mid-cap share performers over the past 52-weeks according to Commsec.
Source: Commsec, Sept 9, 2019.
Clydesdale & Yorkshire Bank (ASX: CYB) is a UK bank I've repeatedly warned investors ever off ever since its 2016 initial public offering as a spin-off from the National Australia Bank Ltd (ASX: NAB).
One of the main reasons I suggested investors avoid it was the long wrap sheet of regulatory failings that this week once again came about to haunt it as compensation costs blowout. I also dislike its competitive position as a regional lender in a soft economy. Unlike Australia, UK banks have generally provided poor returns for more than a decade, which is a reflection of a tougher competitive environment.
Adelaide Brighton Ltd (ASX: ABC) is the construction and cements business that has blamed soft new housing starts in Australia for weaker-than-expected demand and performance.
Blackmores Limited (ASX: BKL) has revealed a recent problem as sales into China either directly or via third parties appear to be slowing drastically. The question for investors is whether this is a temporary blip amidst a steady long-term growth trajectory, or a sign of more pain to come. For what it's worth I sold what remained of my holding prior to its August profit report.
Costa Group Ltd (ASX: CGC) is the fruit and vegetable grower that has coughed up a couple of profit warnings on the back of lower-than-expected prices for produce and as as some production disappoints.
AMP Limited (ASX: AMP) has been clobbered by the Royal Commission into financial services and the allegations levelled against it. It has also been forced to scrap its dividend as a new management team work through a 'turnaround' plan.
Corporate Travel Management Ltd (ASX: CTD) has been targeted by short sellers and has suffered some bad luck due to Brexit and the Hong Kong political protests (including an airport shutdown) hurting its short term sales.
New Hope Corporation Ltd (ASX: NHC) is an ASX coal miner that delivered record production across its NSW and Queensland operations in fiscal 2019, but that hasn't been enough to offset rising costs and a softening coal price.
Cimic Group Ltd (ASX: CIM) is the global construction business that is operationally complex and warned investors over fiscal 2019 that its 'engineering' group continues to underperform.
Boral Ltd (ASX: BLD) is the cements and building materials business that blamed soft new housing starts in Australia and the US for its recent problems.
Worleyparsons Ltd (ASX: WOR) is the oil and gas engineering services group that disappointed investors with a soft fiscal 2019. Moreover, it declined to provide any specific guidance for fiscal 2020 other than to warn that "global macro-economic uncertainty" remained a worry.
Foolish takeaway
As we can see from the mixed list above some of these companies may face temporary problems, some cyclical, and some one-off issues like the Hong Kong protests. Some may have just been overvalued in the first place as well.
So if you do own a 'losing' company be sure to ask yourself why the stock is falling and whether the underlying company has a chance of turning itself around. If the answer is no it might be best to take a loss, before the stock falls further.
