Two years ago I did something really stupid. I bought Aston Martin (LSE: AML) shares. Not just stupid because it’s gone badly wrong, but because my investment process was dreadful. I bought the FTSE 250-listed James Bond-endorsed car maker for all the wrong reasons.
I’m no petrol head. I watch the Bond films but I’m hardly a superfan. Even so, I was seduced by the reflected glamour and fond memories of the Aston Martin DB5 Corgi die-cast model I got for Christmas 1974, complete with ejector seat and tyre-slasher blades.
That, in case it needs saying, is not a sound investment thesis.
FTSE 250 disaster movie
I also forgot one of the most basic market lessons of all. Just because a share price has fallen 90%, as Aston Martin’s had since its October 2019 IPO, doesn’t mean it can’t fall another 90%.
The shares are down another 40% over the past year. Personally, I’m down more than 50%. It’s comfortably the worst investment in my Self-Invested Personal Pension (SIPP).
I bought on a whim, using spare cash in my SIPP, and promptly learned a painful lesson. Was I an idiot? The simple answer is yes. But out of curiosity, and perhaps a desire for consolation, I decided to ask ChatGPT.
I would never use AI for stock picking (ChatGPT openly admits it isn’t designed for that). Aston Martin aside, I research my stock purchases carefully, and can’t rely on chatbots because the information can be outdated and wildly wrong. Anyone using it to pick stocks is asking for trouble. So what did it say?
Bad stock pick
As expected, it began with a few kind words. It likes to reassure. “First, don’t beat yourself up too much”, it told me. “You took a conscious risk, understood it was speculative, and learned something uncomfortable but valuable”. Ah. How reassuring. I still favour stupid though.
It said I’d underestimated how long a weak business can stay weak. “It’s a classic behavioural trap. Aston Martin felt like a fallen icon that had to bounce. Unfortunately, markets don’t work that way”.
ChatGPT then said with unaccustomed waspishness: “A stock can fall 85% and still be over-leveraged, structurally unprofitable and dependent on repeated bailouts. Aston Martin has been all three”. Ouch!
The bot then did what it does best, and produced lists.
The bull case for Aston Martin
- Enduring global brand prestige.
- New models may stabilise volumes.
- Margins improving.
- The chance of a relief rally if execution improves.
The bear case for Aston Martin
- Heavy debt, chronic cash burn, repeated dilution.
- Tiny margin for error in a cyclical luxury market.
- Shareholders last in line if anything goes wrong.
That’s about as far as I’d trust ChatGPT. It’s good at generalities, less so at accurately sifting through financial data and making decisions based upon it. Here’s my view. I’m certainly not throwing more money at Aston Martin. I wouldn’t suggest investors consider it today.
Despite that, I’m not selling. My holding’s tiny and there’s value in keeping it as a permanent reminder of Warren Buffett’s rule number-one of investing. Don’t lose money.
It’s also a reminder of my own newly minted rule: don’t be stupid.
