At the end of February, I sold my holding in bookmaker, William Hill (LSE:WMH). This article will detail why I chose to relinquish my shares in the company and why I won’t be returning soon.

When the fun stops, sell

As investments go, William Hill has been on a poor run of form. A disasterous Cheltenham Festival coupled with Leicester City’s miraculous Premier League title win has led the £2.36bn cap’s share price to tank in recent weeks. It now stands at just over 304p. I sold at 399p. Over the years, I was content to sit back and collect the dividends believing that the company’s solid track record and fairly predictable earnings would make it a worthwhile investment, despite ever-increasing industry regulation. However, the apparent lack of activity compared to its peers and a less-than-positive performance over the last year forced my hand.

A recent trading statement from the company doesn’t make good reading. Despite an encouraging performance from its US business, the company’s online net revenue was down by 11%. Overall, group net revenue declined by 3%.

The Leicester effect

William Hill’s CEO, James Henderson, believes that Leicester’s title win will encourage more bets from people on outsiders, including those who normally shun the gambling industry. While it’s probably true that a few irregular gamblers may be tempted to place a cheeky bet on Burnley winning the title (or Leicester repeating their feat), this isn’t a trend that will be sustained in the long term. Leicester’s triumph was an anomaly, albeit a highly refreshing one. Moreover, all bookmakers have recognised the need to reduce the odds of such an event happening again. The days of 5,000-1 are over, I feel. If the odds are no longer attractive, punters will be disinclined to bet.

Of course, it may be argued that Euro 2016 will do the bookmakers (and their investors) no harm at all, so long as England, Wales, the Republic of Ireland and Northern Ireland aren’t ejected from the competition too early. Fair point. But a decent run by any of these teams will surely benefit all UK-based bookmakers. In the incredibly competitive market that William Hill operates in, it’s hard to see how the company can rise above its peers with significant structural change. This may take the form of a renewed bid for 888 Holdings (LSE: 888), a company William Hill attempted to buy last February. The prospect of a takeover may make the former more attractive to investors.

Contrarian bet?

Naturally, the recent sharp drop in the share does present an opportunity for contrarian investors to place their bets on a recovery in William Hill’s fortunes. With a forecast P/E of just over 12, the shares are certainly looking cheap. A dividend yield of 4.22% will also be attractive to patient investors, confident that things can be turned around.  Personally, I’m not tempted to climb back on board at the current time. There needs to be evidence that the company is making some kind of progress in terms of addressing the decline. William Hill could be a winning investment but for me, there are companies elsewhere with better prospects.

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Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.