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”.
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.
