My Stocks and Shares ISA has been performing pretty well lately. With stocks such as Nvidia, Amazon, and Uber in my portfolio, returns in 2024 have been strong.
However, I do have some ‘dogs’ in my portfolio. One is FTSE 100 insurer Prudential (LSE: PRU).
Currently, I’m down about 48% on this stock. So, what’s the best move now?
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The wrong insurance stock
I’ve owned this stock for a few years now. And I’ve bought several tranches of shares in that time.
My investment thesis here has always been pretty simple. With the company focusing on high-growth markets across Asia and Africa, I figured that it would outperform other insurance stocks by a country mile.
Sadly, this thesis hasn’t played out. In fact, it has backfired spectacularly.
Given China’s economic woes, the shares have tanked. What’s particularly frustrating about this is that, in recent years, many other insurance stocks have soared.
Shares in Warren Buffett-owned stock Chubb, for example, have nearly doubled over the last five years. Clearly, I’ve been in the wrong one.
My options now
The good news is that I have a long-term investment horizon. So, that gives me a few options.
One is to simply do nothing. If the shares were to rebound, this could pay off.
Another is to buy a few more shares and ‘average down’ my cost basis. This could enhance my returns if the share price was to bounce.
A third option is to cut my losses, sell, and redeploy the capital into another stock. This could be worth considering. After all, there are a lot of stocks in the market that are performing well today. And there’s no obligation to recover share price losses with the original stock.
What I’m going to do
Having looked at both recent news from the company and the stock’s valuation, I’ve decided that I’m going to hold on to my shares for now. And I may buy a few more at some stage in the near future (I’m still deciding whether I want to boost my holding).
I continue to believe that the outlook for the company, in the long term, is attractive. The fact that the firm just increased its interim dividend by 9% suggests that Prudential’s management is optimistic about the future as well.
Meanwhile, with the shares trading on a price-to-earnings (P/E) ratio of 8.6, I think there’s a fair bit of value on offer today. It seems management agrees with this too – recently the company has been buying back its own shares.
Of course, the shares may not rebound any time soon. A lot will depend on China, which is really struggling right now (and needs more stimulus from the government).
Another issue is that Prudential’s management has set high targets. Between 2022 and 2027, it’s aiming for annualised growth in new business profit of 15% to 20%. Given China’s problems, it may not be able to achieve these in the years ahead. This could lead to further share price weakness.
I really do believe in the long-term growth story here, however. So, I’m going to keep the stock in my portfolio and be patient.
