Last week, I sold a UK share after holding it for less than three months. That’s something I almost never do for two reasons.
First, when I buy a stock my minimum target holding period is five years, although ideally I’d want to hold it for decades. Second – and I see this as a fault – like many investors I’m reluctant to crystallise my losses. Not this time though.
The stock in question was home improvement retailer Wickes Group (LSE: WIX). On 2 August I admitted that this “isn’t the whizziest stock on the FTSE All-Share but I’m hoping that will change”.
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Don’t blame it for the ailing share price
Shares in the building material supplier had done poorly after it was spun off from Travis Perkins in April 2021, but I felt Wickes had been punished by events beyond its control. Namely the cost-of-living crisis, which drove up materials and labour costs, while hitting demand from doer-uppers.
Its Design and Installation operations unit has been hit particularly hard. While people could find cash for smaller projects, many put bigger jobs like kitchens and bathrooms on hold.
I popped Wickes into my Stocks and Shares ISA on 13 September, thinking it would rebound nicely as inflation and interest rates fell, and the UK’s first-half economic recovery gathered pace. I also thought it would benefit from the Labour government’s house building drive. With the stock yielding 7% and trading at 10.29 times trailing earnings, I couldn’t resist.
My assumptions fell to pieces, one by one. The UK economy slowed in the third-quarter, as businesses and consumers fretted over October’s Budget. After growing 0.7% in Q1 and 0.5% in Q2, GDP edged up just 0.1% in Q3. It actually fell 0.1% in September.
Chancellor Rachel Reeves move to hike employer’s national insurance charges will hit Wickes, which employs more than 8,000 across 233 stores.
I think there are better FTSE stocks out there
A high number are on the minimum wage, which was also hiked by an inflation-busting 6.7% from April, in another blow to Wickes. With narrow operating profit margins of just 4.4%, this is going to hurt.
It’s also become clear that Labour’s aim to build 1.5m homes over five years is a little optimistic. Finally, inflation is climbing again, with the Bank of England predicting it will be back to 3% next year. In September, when I bought Wickes, it was down to 1.7%.
So I crystallised my 15% loss on 27 November. I did get one dividend though!
Today, Wickes shares look even cheaper trading at 9.74 times earnings, while the yield is higher at 7.41%. One day, I may kick myself for my impatience.
So why was I so quick to sell when I’ve never considered ditching my other underperformers? The underlying problem is that Wickes didn’t excite me enough in the first place.
It’s a solid business, with a high yield, but with events turning against it I couldn’t sustain my interest. There are so many other stocks I’d rather buy for my ISA today. I’ll use the money for something I (hopefully) won’t be in such a rush to sell.
