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Beginners Portfolio: The Damage From Quindell plc And Tesco plc

This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.

The Beginners’ Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and do not constitute advice to buy or sell.

Quindell (LSE: QPP) and Tesco (LSE: TSCO) — my two big mistakes! Before I look at them here’s our overall valuation, with Quindell gone after a 33% loss:

Initial investment £5,073.66
Company Shares Buy Cost Bid Value Change %
Tesco 159 305.5p £498.23 194.0p £298.46 -£199.77 -40.1%
Glaxo 34 1,440.5p £502.22 1,462p £487.08 -£15.14 -3.0%
Persimmon 49 617.9p £352.21 1,493p £721.57 £396.36 +122%
Blinkx 1,319 36.9p £499.68 26.5p £339.54 -£160.15 -32.0%
BP 112 434.5p £499.01 414.7p £454.46 -£44.55 -8.9%
Rio Tinto 31 3,132.9p £996.05 2,995p £918.45 -£77.60 -7.8%
BAE 146 332.3p £497.59 460.6p £662.48 £164.89 +33.1%
Apple 14 $65.50 £605.98 $112.70 £956.45 £350.47 +57.8%
Aviva 146 321.4p £470.71 525.0p £756.50 £285.79 +60.7%
Barclays 210 254.2p £546.56 229.7p £472.37 -£74.19 -13.6%
Cash         £464.95    
Current value         £6,532.31 £1,458.65 +28.7%

Quindell

I gave Quindell the boot a month ago. After what I saw as shameful evasiveness, I simply did not trust chairman Rob Terry. His dismissive about-turn over the collapse of Quindell’s deal with the RAC was cathartic for me, and I was so shocked by his attitude that I ran for the exit.

My fears have proved prophetic, and we’ve since had directors selling millions of shares while claiming to be buying, an RNS containing untruths about the number of shares owned by directors, and carelessness at the very least on the part of the company’s nominated adviser.

The Beginners’ portfolio lost £166 on Quindell by selling at 139p, but I’m relieved I got out when I did — the price is down around 50p as I write. Along with some other bears, I now expect the Quindell share price to reach zero pence.

The lesson? Sometimes it makes sense to dive in when you think you see a screaming bargain, but most times you need to wait a while and do some deeper research first. I’m disappointed that I made the wrong call, but I’m pleased I rectified my mistake promptly.

Tesco

With Tesco, I failed to rectify my mistake because I never really grasped the extent of it — I kept feeling the bad news was all out and I was afraid of getting out at the bottom, but things got worse and the shares fell further.

I don’t know what I would have done differently, because the only clues I now have are all from hindsight. I did not foresee the extent of Tesco’s ills, and I honestly don’t think I could have done so — and it’s some small comfort that I’m in good company, as Warren Buffett got it wrong as well.

What do I do now? I’ll hijack a quote that my colleague Rupert Hargreaves highlighted — “We can’t see much that the management can do wrong in the next few years that would make the shares worth less than today’s share price…”, said analysts at Bernstein.

At 194p, the price has picked up in the past couple of weeks, and I’m sticking with Tesco now.

You can do it

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.