My Stocks and Shares ISA has two giant weeds in it. Should I pull them out?

This writer has two massive losers inside his Stocks and Shares ISA portfolio. What’s gone wrong? And is it time to sell up and move on?

| More on:
Middle-aged white man pulling an aggrieved face while looking at a screen

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As I checked over my Stocks and Shares ISA portfolio at the weekend, two shares stood out. Not in a good way, unfortunately.

One FTSE 100 stock has plunged by 48% since I invested (twice!) last year, while the other is down 61%.

I’m now left wondering whether I should cut my losses and invest elsewhere.

A potential six-year wait

First up is Ocado (LSE: OCDO). Shares of the online grocer have fallen by a shocking 55% year to date.

This makes it the worst-performing Footsie stock of 2024, and it isn’t even close. In second-bottom place is St James’s Place, whose shares are ‘only’ down 29% year to date.

With a market cap of just £2.8bn, Ocado could soon be relegated to the mid-cap FTSE 250.

I invested because I’m bullish on its technology and robotic unit, which helps power the online operations of global grocers, including Kroger and Japan’s AEON.

Indeed, Ocado now has partnerships in seven of the world’s top 10 online grocery markets. This Technology Solutions division grew 44% in its last financial year.

However, the overall group remains unprofitable. It logged a £403m pre-tax loss last year. And its chief financial officer said it is expecting to make a pre-tax profit in the next six years.

Wow. That’s a long wait for potential profits, one which investors have clearly baulked at.

A misfiring business model

The second stock is Ginkgo Bioworks (NYSE: DNA). Shares of the synthetic biology company are down 71% in the past two years.

For those unfamiliar, Ginkgo programmes microbes on behalf of its customers. These include Novo Nordisk, Pfizer, and Merck.

Like Ocado, the firm is deeply unprofitable. It lost $178m in Q1. And while it added 17 new cell programs, representing 31% growth over the prior year, its $38m in revenue missed estimates by $8m.

Meanwhile, it lowered its full-year cell engineering services revenue guidance to $120m-$140m. That would be $1m year-on-year growth, at best.

For context, when the firm went public in 2021, it expected $628m from this segment.

This tells us the business model isn’t working. If you’re adding more programs from big pharma customers, but your revenue isn’t growing, then that is a serious problem.

To address this, management is cutting costs and changing how its contracts are negotiated.

One saving grace is that the company still had a $840m cash position at the end of the quarter. It is targeting adjusted EBITDA breakeven by the end of 2026.

Given the dreadful execution so far though, I’m not holding my breath.

Weeds and flowers

Warren Buffett is fond of quoting an analogy used by Wall Street legend Peter Lynch: “The weeds wither away in significance as the flowers bloom. Over time, it takes just a few winners to work wonders.”

Fortunately, along with these duds, I have stocks like Axon Enterprise, Games Workshop, and MercadoLibre. All have been wonderful long-term winners for me.

These flowers more than make up for the weeds!

Another Peter Lynch quote comes to mind here: “Selling your winners and holding losers is like cutting the flowers and watering the weeds.”

As things stand, I certainly won’t be watering these portfolio losers. In fact, I’m tempted to pull them out and invest in stocks with better prospects.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in Axon Enterprise, Games Workshop Group Plc, Ginkgo Bioworks, MercadoLibre, and Ocado Group Plc. The Motley Fool UK has recommended Axon Enterprise, Games Workshop Group Plc, MercadoLibre, and Novo Nordisk. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Close-up of British bank notes
Investing Articles

£8 per year in extra income for life, for each £100 invested today? Here’s how!

Christopher Ruane explains how he would aim to set up extra income streams for the rest of his life by…

Read more »

Photo of a man going through financial problems
Investing Articles

With a £20K Stocks and Shares ISA, I’d target £1,964 in annual dividends like this

With an annual passive income target close to £2,000, our writer explains how he'd put a £20K Stocks and Shares…

Read more »

Illustration of flames over a black background
Investing Articles

Down 63% in 2024, what’s going on with the Avacta (AVCT) share price?

2024 has been a difficult year for many companies in the biotechnology sector, with the AVCT share price down heavily.…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Here’s how I’d invest £800 the Warren Buffett way!

Christopher Ruane learns some lessons from super-investor Warren Buffett he hopes could improve his own stock market performance.

Read more »

British Isles on nautical map
Investing Articles

Michael Burry just bought 175,000 shares in this FTSE 100 company

Scion Asset Management announced a $6.5bn stake in BP this week. But what could Michael Burry be seeing in an…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

£5,000 in savings? Here’s how I’d aim to start making powerful passive income today

With a cash lump sum to invest, this Fool lays out how he'd start making passive income. He also details…

Read more »

Investing Articles

Just released: our 3 top small-cap stocks to consider buying before June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

My best FTSE 250 stock to consider buying now for passive income while it’s near 168p

This is a rare stock with a growing underlying business and a fat dividend yield – it’s worth consideration for…

Read more »