Did you have a romantic Valentine’s Day, or were you glad to see the back of it? Either way, I’m hoping this unpredictable market will give us all some affection…
Thankfully, my own portfolio has just started to find that lovin’ feeling after a wobbly few weeks.
I mean, a few of my laggards from last year have suddenly been aroused and, so far in 2014, I’m up more than 5% versus a FTSE 100 that’s down about 1%.
It’s early days of course – and anything can happen – but it’s always good to enjoy an early rise on the market…
Maybe 2014 really is the year this higher-risk punt will multi-bag
Leading the way for me has been French Connection (LSE: FCCN).
Now back in early January I said this “hapless fashion chain” was a “higher-risk retail punt that’s not for widows and orphans”.
But it seems the widows and orphans may have missed out…
You see, the shares are up 26% so far this year following an upbeat trading statement and signs that losses are finally turning into profits.
Indeed, after years of watching the shares going nowhere, maybe 2014 really is the year this higher-risk punt will multi-bag for my portfolio…
Well, I can only cross my fingers and hope by Valentine’s Day next year, the market will have become infatuated with French Connection…
…and delivered my long-awaited multi-bagger!
And on the subject of love, shares, Valentine’s Day and multi-baggers…
The shares hit £102 and he made a 1,500% profit
…let me recount a Fool article that was published 14 years ago today.
Now I won’t name the author or the share in question, but I will provide a few choice quotes:
“My intention was, as with all of my share purchases, to buy the shares and hold them “forever”, or until something changed with the business. Some 14 months later, my shareholding… has increased from a relatively small part of my total investments to one that now dominates my portfolio. With the shares trading at £102 I have seen an average increase in the value of my holding of nearly 1,500%.”
The author then went on to say:
“You should never fall in love with a share, because they will not love you back. But I have to admit it, I am head over heels, and totally smitten.”
Now I have never made 1,500% from any share, let alone 1,500% from any share in just 14 months.
But knowing myself as I do, I suspect I too would be ‘totally smitten’ with that sort of hyper-gain. It’s just human nature – my brain would certainly go to pieces.
Anyway, fast forward from 2000 and you can probably guess what happened next. Yes, it turned out that £102 was close to the share-price peak, the 1,500% gain was indeed too good to be true…
…and the stock collapsed (and had disappeared altogether by 2006).
Well, the author did say we should never fall in love with a share, because they will not love you back.
(Note: I’m pleased to say the author revealed a year later that he had cooled his affair and had banked some “significant gains”).
I bet a fair few investors will be looking very fondly at their gains right now
February 2014 seems as good a time as any to remind ourselves about becoming besotted with big share winners.
I mean, the current bull market has created no end of doubles, triples and quadruples… and I bet a fair few investors will be looking very fondly at their gains right now.
Take those investors holding GW Pharmaceuticals (LSE: GWP) for instance, some of whom I’m sure may be starting to feel very fond of the stock.
You see, these shares traded as low as 40p last year, while this year they have traded as high as 330p.
GW’s market cap is now close to £700m, although sales are running at less than £30m and profits remain elusive.
And what about the gravity-defying Ocado (LSE: OSCO)? Some investors here may have become far too obsessed…
I mean, after the shares have soared from 60p to almost 600p in the last 14 months, forecast profits of just £4m now support a market cap of £3bn-plus.
And what about ASOS, which has zoomed from 3p to £60-plus in 11 years…
Now I would definitely be head over heels in love with ASOS had it 2,000-bagged for me, even if it does trade at 100 times forecast earnings right now!
All I need now are the multi-baggers to fall in love with…
Whether GW Pharmaceuticals, Ocado or ASOS will continue to repay the affections of their lovestruck investors is hard to judge right now.
But they do say love is blind, and too much obsession with a major gain can sometimes lead to overlooking some pretty obvious valuation risks.
My simple advice? Don’t be afraid to ‘break up’ when the numbers no longer add up.
All I need now are the multi-baggers to fall in love with…
