I want to tell you the story of four companies.
The first is (shh… I have to say this quietly) a travel company.
The second is an online retailer.
The third is a consumer goods business.
The last is in the media monitoring game.
What these companies have in common is that they’re all recommendations of one of our investment advisory services, Motley Fool Share Advisor.
The other thing they have in common is that they’ve all been taken to the woodshed at one time or another over the past 18 months.
I’m sure I don’t need to tell you what’s impacting travel at the moment.
And shares of this company, Corporate Travel Management Ltd (ASX: CTD), (I own shares, for the record), have had a torrid time of late.
From around $22 in January, shares fell to under $5 by mid-March.
The online retailer is Kogan.com Ltd (ASX: KGN) (I own shares here, too). When the founder, Ruslan Kogan, sold a stack of shares in August last year. Before the sale, shares changed hands for $6.02. A couple of days later, they were $5.54. By early March, you could pick one up for $3.60.
The third company on our list was one of the market darlings in 2017 and early 2018. Shares sold for $7.70 a pop. The company is skincare peddler BWX Ltd (ASX: BWX), the name behind Sukin, and other brands. Fast forward almost exactly 12 months to January last year, and you could buy shares for $1.54 each.
The last on our list is iSentia Group Ltd (ASX: ISD), which provides data and analysis on ads and news mentions of companies, issues and people. Its shares sold for almost $5 in late 2015. By January of last year, they were only 25c.
Four businesses, each of which suffered precipitous drops, all for ostensibly decent reasons.
I mean seriously… travel?
And when a founder is selling, why hang around?
And BWX, which had torched a seemingly fast-growing business and butchered an acquisition?
Ditto iSentia, which had paid up for a business that ended up being worth literally nothing.
Four absolute dogs.
“Get rid of ‘em”, right?
I mean, just think for a second:
When Ruslan Kogan sells his shares… and the share price falls by more than 40%… aren’t you just a bit suspicious. I mean, he obviously knew something, right? And who wants to wear the pain of a 40% loss? Far better to cauterise the wound by selling and moving on, with a dirty look back at Ruslan, who obviously took us for mugs.
And when Corporate Travel fell… I mean the shares are off by more than 75%! Why hold onto that – if you’ll excuse the term – crap, anyway. Don’t we want shares that go up?
BWX was a basket case. Everyone could see that. Sales growth went into reverse. The company torched a heap of cash. And it lost its two most important executives.
iSentia was over. It was a shadow of itself. A botched acquisition, plus keen competitors and ubiquitous online data meant the company was never going to recover its former glory. And yes, that 95% share price fall!
The only problem is that I’m a stubborn bastard.
Despite what ‘everybody’ already ‘knew’, I didn’t sell any of them.
Not because I was being stubborn, per se. There’s no glory in that.
But because I refused to just listen to everyone else, and do what they were doing.
Truth be told, I’ve never really been one to care too much about what other people think.
I’m not one of the cool kids. Don’t feel the need to look or sound impressive.
But nor am I someone who makes a point of being disagreeable. Which hopefully makes me a good fit as an investor.
But back to our Four Horsemen.
While people were bleating about Ruslan’s share sales, we saw no reason to panic. The numbers were good, and the trajectory was right.
Our thesis called for a steady long-term growth in customers, spending more across more product categories, encouraged by Kogan’s clever marketing and product choices. Oh, if you’re prone to conspiracy theories, Ruslan must have known something. (Also, Bill Gates and 5G are out to get you. He’s probably reading this right now…).
In the end, Ruslan Kogan left millions on the table. Shares went from $3.60 to currently sit north of $22. His sale, at just under $6, would have quadrupled in value. No, he’s not crying into his coffee, and nor should he be. We never had a problem with him selling, and good luck to him. In the meantime, his continued focus on running the company has made a lot of money for a lot of people.
So much for the conspiracy (but maybe that’s just what they want you to think 😉 )
And Corporate Travel?
Those $5 shares of the terminally injured business are now selling for around $13.40. Not dead after all.
What about BWX?
After a long time in the doldrums, they’re trading 300% higher than they were 18 months ago.
Four out of four coming righ…
Not so fast.
Poor old iSentia is still completely languishing, at almost the same level as last January.
So why include it?
Because I’m not perfect, and cherry-picking just the good stuff is disingenuous.
Sometimes, holding on doesn’t work out.
I’m not ashamed to admit I’m wrong sometimes.
(And, let’s be clear, any of these four companies could change course at any time. Beware of people declaring victory – or defeat!)
Investing isn’t about always being right (it’s not possible).
It’s about being right as often as possible, while making sure you make enough money from the winners to cover the losers with enough left over to beat the market.
It’s not easy.
It’s often emotionally – and financially! – challenging.
Very, very few companies go up and to the right on the old share price chart, without any volatility.
My point, then, is that letting the market tell you what to do is just plain silly.
The market thought Kogan shares were only worth $3.60. That Corporate Travel was only worth $5. And that BWX was worth only $1.50 and change.
Kogan shares now sell for six times that price. Corporate Travel for more than 2.5x. And BWX about 3x.
And yes, iSentia for peanuts.
Overall, I’d be very happy to own those four companies. Yes, even the loser, if it meant I also got to own the winners. Of course, I’d be happy just to own the winners, but my crystal ball is on the blink.
I’m also pretty happy that our members at Motley Fool Share Advisor have benefited from these gains, too. We ask them to put their trust in us, and I imagine that’s easier said than done when the market falls out of love with the companies we recommend!
Remember, pessimism always sounds smart, but it’s usually self-indulgence and feelings of intellectual superiority dressed up as sober analysis.
You – and I – will make mistakes. We’ll be wrong.
But so will the market.
Don’t let it – or the Negative Nevilles and Nellies – tell you what to do.
Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now
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Scott Phillips owns shares of Corporate Travel Management Limited and Kogan.com ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended BWX Limited and Corporate Travel Management Limited. The Motley Fool Australia has recommended iSentia Group Ltd and Kogan.com ltd. 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.
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