Here at The Motley Fool, we subscribe to the 80/20 rule in investing. Namely, 20% of the holdings in a portfolio are responsible for 80% of the portfolio’s growth. Inevitably, this means that — put mildly — some of the shares we buy don’t live up to the expectations we had originally invested in them.
Since selling is half of the investing equation, we asked some of our contract writers to share some of the lessons they’ve learned over the years!
Boston Beer Company
What it does: Boston Beer manufactures a range of alcoholic drinks. Its best-known brand is Sam Adams.
By Stephen Wright. I wish I’d never bought shares in Boston Beer Company (NYSE:SAM). The stock turned out to be a terrible investment for me, but more than that, I bought it for all the wrong reasons.
I bought the shares in various installments around August 2021. At the time, the stock was falling after some previous good performance and I decided that it looked cheap.
The trouble is, I wasn’t basing that view on very much – a strong balance sheet and a sense the stock couldn’t go much lower. How wrong I was.
The business had been faring badly as a result of overinvestment in hard seltzers. When this turned out to be a passing trend, rather than something more durable, the value of the stock fell sharply.
Ultimately, I got rid of the stock at a significant loss. And the current share price is still well short of where I sold my stake as the business continues to battle headwinds.
The lesson here for investors is clear enough. Proper research into investments involves more than just looking at prices and seeing that they’re falling.
Fortunately, I’ve been able to move on from that investment. And I’m careful nowadays not to repeat the same mistakes.
Stephen Wright does not own shares in Boston Beer Company.
What it does: Cineworld Group is the world’s second-largest cinema chain and operates in the US, Israel and across Europe.
When I bought Cineworld shares the firm seemed to be in great shape. Powered by a steady stream of blockbuster hits, the global box office was sitting at record highs. The UK company had also taken over Regal Entertainment a year earlier to gain a foothold in the lucrative North American market.
The problem was that the business had loaded itself with debt to pursue global expansion. So when the pandemic came along and its theatres shuttered, it came close to collapse. That’s when I decided to sell up.
I’m pleased I did, instead of hanging around for a potential turnaround. Cineworld’s share price now sits at just 0.42p. And the company will be delisted when administrators are appointed soon, wiping out shareholders completely. I learnt a valuable investing lesson: be careful when buying businesses that load themselves with debt.
Royston Wild does not own shares in Cineworld Group.
What it does: Greatland Gold hopes to be extracting gold and copper from its mine in Western Australia by the end of 2024.
I should have undertaken better research and considered its valuation more closely before buying the shares.
The company’s flagship Havieron gold-copper project was last independently valued in December 2021, at $1.2bn. This implies that Greatland’s 30% share is worth $360m – 25% less than its current market cap.
But the directors argue this is not reflective of the mine’s potential. They claim it contains 6.5m ounces of gold alone. At today’s prices this is worth nearly $13bn.
They also believe that the company’s other substantial interests — which are in the very early stages of exploration — are overlooked.
And because the company feels unloved, it’s planning to list on the Australian stock market. As part of the process, it’s considering whether to raise more money. But if it proceeds, this will mean further dilution for me.
James Beard owns shares in Greatland Gold.
What it does: Shell is an upstream producer and downstream marketer of oil, gas and energy products.
What happened next?
Exxon maintained its longstanding Dividend Aristocrat status, continuing to raise its shareholder payout annually. But Shell cut its dividend for the first time since the Second World War.
Since then the dividend has grown sharply, although it remains well below its pre-pandemic level.
Seeing the dividend contract for the first time in decades was a surprise to me. But dividends are never guaranteed, so maybe I should have been less shocked.
What really made me wish I had not bought Shell was that the sudden, huge cut shook my faith in management. Rivals like Exxon kept a steady head, so Shell’s large cut seemed like a knee-jerk reaction to me.
I lost my faith in the company’s management at that point and ended up selling all my Shell shares.
Christopher Ruane does not own shares in any of the companies mentioned.
What it does: UK-based fashion retailer operating both online and through a network of 219 brick-and-mortar stores worldwide.
By Zaven Boyrazian. I’ve made plenty of mistakes as an investor over the years. And one of my biggest ones was buying shares in Superdry (LSE:SDRY) in 2017. The stock fell over 90% before I finally exited my position in September 2020. And even today, shares have tumbled even further. So, what happened?
There were a lot of moving parts affecting the Superdry share price. But looking back, there was a glaring warning signs that something was seriously wrong.
The co-founder and CEO, Julian Dunkerton, decided to step down in 2018, selling off £71m worth of shares in the process. Then, only a few months later, he decided to return, stating that his previous departure and massive stock selloff was a protest against the strategy other managers were pursuing.
Internal politics within the executive suite is never a good sign. And considering the fashion stock continued to crash even after Dunkerton resumed his role, this spat has seemingly left a permanent mark on a once-thriving business.
Zaven Boyrazian does not own shares in Superdry.