A few stocks in my portfolio of about 50 have disappointed me...so far. I am going to discuss them in this blog-post. In no particular order.
Anheuser Busch InBev (BUD)
BUD has not given me any joy either by way of capital growth or dividend (it slashed its dividend). It dipped down to 70s but has come back up in 90s. I don't track it much. I am not going to sell it.
Why did I buy it? Well, if you go to its website and scan thru its beer brands, it seems to own all the bestsellers across the globe, brands recognisable everywhere. From Miami to Madrid to Mazandaran (is alcohol illegal in Iran?) to Malaysia. I bought probably because its brand ownership was overwhelming. You thought wow what could go wrong. But BUD borrowed huge sums from bankers and made a pile of acquisitions till its balance sheet creaked. It acquired Sab Miller for $100 billion! Plus the guys who crashed the party at KHC are involved in this one as well. In running it. The 3G capital guys. If this was not enough, beer volumes plateaued. I am not going to sell it. It will come back up some day. No idea when.
This is another one that, in hindsight, seems like a pointless purchase. Again, on paper, it doesn't look bad at all. It has some very well know aerospace brands - Cessna, Beechcraft, Hawker, Bell. Who hasn't heard of Bell. TXT makes golf carts which sell all over the world. It also sells defence and armaments. But the stock has not done much. And pays less than a pittance as dividend. So no joy again. But not selling.
Rolls Royce Holdings (OTCPK:RYCEF)
An iconic British industrial engineering company. They do a whole bunch of things, among which, manufacturing and supplying aircraft engines (Trent). They have competition in that from just 2 other players - UTX (Pratt Whitney) and GE. That's it.
But something nasty happened to them a few years ago. Their management lost direction, got embroiled in bribery cases (which they settled by paying a huge fine in 2017) and unleashed a series of profit warnings. Since then, after a management overhaul and biz restructuring, they are trying to come back up. But Trent technical glitches continue to drain money. The CEO has promised 2020 to be a good year when RR will produce a billion GBP of free cash. Let's see.
How could they sink like they did? Hasbro is doing well. What the hell did the MAT guys do? This one truly stinks.
This is a small company. I normally don't invest in small caps. I have a few oil E&P small caps (which have done well) and then I have this one. It's an Oil / Gas engineering company. Its share price crashed when oil crashed in 2014-16. Its not come up since. Will it ever? Don't know.
So that's the litany of my errors in judgment in the market. What did I learn?
1. Never be swayed or overwhelmed by any singular factor. E.g. great brands or great technology. For a company to succeed over the long term several things must work - decent governance, market dominance via great products and services, cautious balance sheet management and capital efficiency, skilful navigation of the political and regulatory environment etc. All of these must come together.
2. Fate plays a role. There is nothing you can do about it. You buy the stock of a great company and then some guys like 3G capital enter your company and screw it up! What could you have done. Or a bribery scandal emerges from the woodwork? There is no way you could have known or pre-empted. Accept it.
3. Diversify across sectors and companies. Your errors will be compensated for by the good decisions you made. Unless fate decides to screw you!
Per usual, I would love to hear your feedback dear reader.
Disclosure: I am/we are long BUD, TXT, MAT, RYCEF, POFCF.
Additional disclosure: This blog is to generate a constructive discussion. Not a recommendation to buy / sell / hold stocks. Do your own due diligence.