2 investing lessons, 5 great investments, and more gains to come…
9 March 2009. It is inked indelibly into my brain. It was the day when the FTSE 100 fell to an intra-day low of 3,460.7.
Back in those dark days, the future was as uncertain as it had ever been. The financial system was seemingly not in danger of completely collapsing, but there was still a reasonable chance banks like Lloyds Banking Group (LSE: LLOY), Royal Bank of Scotland (LSE: RBS) and even Barclays (LSE: BARC) could be fully nationalised.
So stock markets kept falling. As shares fell further, leveraged investors were forced to sell. Panicked investors simply bailed out to stop the pain. Pundits were predicting the FTSE would soon fall below 3,000 and could plunge as far as 2,500.
Even as the financial crisis was first unfolding in September 2008, I never thought I'd see the FTSE 100 fall below 4,000. It's hard to imagine now, but in mid-September 2008, the index of leading shares still stood at the relatively heady level of 5,300. From there, in the space of just a few short months, it plunged another 35%!
Two Lessons From The Crash
Of the many lessons coming out of that tumultuous period, these two stand out…
Lesson #1
Markets can fall much further than you can ever imagine. Be mentally and financially prepared.
Lesson #2
Don't invest using leverage/debt. Ever. At moments like we had 12 months ago, all your shares will be sold out from you at precisely the wrong time, usually coinciding with the bottom of the market.
Those investors who were prepared for the losses and weren't panicked out of the market as it plunged to new daily lows have been amply rewarded for their patience and conviction. The FTSE 100 is up 62% off its low point of 12 months ago.
Small Fortunes Have Been Made
Whilst the share prices of most companies has risen over the past year, some companies have shot to the moon. In hindsight, March 2009 was the buying opportunity of a lifetime. Those investors who were brave enough and skilful enough to jump into the jaws of the bear at the time of maximum pessimism have probably made small fortunes.
These 5 shares are amongst the best performers over the past 12 months. They are not necessarily the very best performers, as I've deliberately omitted penny shares like Avis Europe (LSE: AVE) and highly speculative companies like Anglesey Mining (LSE: AYM).
| Company | Sector | Recent
Share Price | 1 Year Gain |
|---|
| Cape (LSE: CIU) | Support Services | 248p | 1,158% |
| Unite Group (LSE: UTG) | Real Estate | 264p | 577% |
| Ferrexpo (LSE: FXPO) | Industrial Metals | 296p | 516% |
| Trinity Mirror (LSE: TNI) | Media | 157p | 482% |
| Kazakhmys (LSE: KAZ) | Industrial Metals | 1,529p | 470% |
Included in this motley crew are a FTSE 100 company (Kazakhmys), three FTSE 250 companies (Unite, Ferrexpo and Trinity Mirror) and one of the largest companies on AIM (Cape). As such, these are not highly speculative companies, and ones we could all have easily bought at their nadir 12 months ago.
Never Too Late To Buy
For sure, investors picking these particular huge winners have had their fair share of luck. But they deserved to be lucky, and well done to those who jumped in at the bottom.
As I said previously, 9 March 2009 was a once in a lifetime investing opportunity. But the key now is not to get fixated on it, and think that just because you missed the bottom of the market, you're too late to buy now.
Just look at Ferrexpo, for example. In the last 3 months, its shares have risen 53%. Yesterday's winners are often tomorrow's winners.
You're never too late to buy. As the old saying goes, there's always a bull market somewhere.
More on the economy and the markets:
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