If you have tears to shed, prepare to shed them now — even if my DIY investment pratfalls only provoke tears of laughter. An occupational pitfall of writing this column is that, when the going is good, it can seem smug. To balance the books, it’s only right to report how my stock market assets have suffered their fair share of shocks. Unlike fantasy fund managers, real life investors have to take the rough with the smooth.
So, without any further ado, here is the latest review of Cowie’s clangers — shares and funds whose prices have fallen by more than 10% since I invested, according to Hargreaves Lansdown’s online calculator. Several, sad to say, have lost much more than a tenth of their value.
Cluff Natural Resources, a British energy company that got caught up in controversy about fracking, remains the stand-out stinker. Impressed by the reputation of its founder, Algy Cluff, I paid 4p a share in August 2014, since when they have plunged 52% to 1.9p.
Thank heavens I never punted as much as 1% of my “forever fund” in this penny stock. It would be tempting to sell and forget Cluff but, instead, I hang on to what’s left in the hope that it will help me resist the temptation of similar spiv stocks in future.
Braemar Shipping Services is another Great British bright idea that went badly wrong. Most of the world’s trade is delivered by sea but my hopes of recovery in this cyclical sector have proved an embarrassing example of premature speculation.
I paid 467p in September 2013, and topped up at 504p that October, but the shares have sunk to 260p since then. Taking all purchases into account, Hargreaves calculates my loss to be an eye-watering 37%.
Worse still, I had 2% of my fund on board before Braemar began to ship water. Dividends expressed as a percentage of the plunging share price deliver a yield of 5.7% to keep my spirits up, but they do say a drowning man will grasp at straws.
Kraft Heinz, the prepared food giant, has proved a can of worms. No amount of ketchup can conceal the bad taste left after paying $78 in September last year for shares that now trade at $58. So much for my homely strategy of investing in companies whose products I enjoy.
The investment guru Warren Buffett is also in the soup at Heinz. Garry White, chief investment analyst at the wealth manager Charles Stanley, is not encouraging. “Kraft Heinz reported earnings 8% lower in its latest quarter. It also faces rising costs and appears to be considering a big purchase. If forced to buy growth, it had better get it at the right price.”
Vodafone, the telecommunications giant, is my biggest disappointment. Encouraged by soaring use of mobiles, I invested more than 2% of my fund in this FTSE 100 blue chip but foolishly overlooked balance sheet fundamentals and am now about 23% down.
This paradox was explained by George Salmon, equity analyst at Hargreaves Lansdown: “Mobile usage is growing but there’s little to differentiate Vodafone from its competitors, meaning customers just choose the cheapest deal regardless of the network.
“Upgrading infrastructure soaks up cash, and the €30bn net debt position casts a big shadow. The yield of 7.5% is an obvious attraction, but there’s work to be done before the payout can grow.”
Medica, a small company that provides radiology analysis to the National Health Service, caught my eye with what seemed a clever idea. Instead of radiologists hanging around in hospitals or travelling to work, x-rays are sent to them by secure email.
Since I paid 190p in April last year, it has provided anything but healthy returns, trading at 155p last week. But Paul Kavanagh, chief executive of the stockbroker Patronus Partners, sees signs of life: “Medica is growing strongly, enabling NHS tele-radiology to reduce costs and speed up scan interpretation. The upside opportunity for the business is significant and the longer-term prognosis remains good.”
BlackRock Latin American is an investment trust in which I have owned shares for about a decade, transferring to Hargreaves at 686p in November 2011, compared with 400p last week.
Richard Troue, head of investment analysis at that wealth manager, summed up the situation by saying: “Few things will test your long-term horizon like an investment in Latin America. Over the short term, a turbulent political environment and weak currencies have worked against you. In the long run, rising consumer spending and economic development are likely to present opportunities.”
Fidelity China Special Situations is another out-of-favour emerging markets trust, where I am currently 14% down. I had originally invested in what was then Fleming China more than 20 years ago, after visiting Hong Kong on business before the handover of the British colony, and I have been in and out of JP Morgan China and Gartmore China since then.
But I was late to the party at Fidelity China, where I paid 237p last October, compared with 214p now. Ben Johnson, collectives analyst at Charles Stanley, told me: “Fund manager Dale Nicholls has delivered strong performance but this trust sits at the higher end of the risk spectrum, as demonstrated by share price movements experienced this year. Only those who are happy with this level of volatility should continue to hold.”
Woodford Patient Capital, a start-ups and technology trust, demonstrates how even the most high-flying professional fund manager can fall to earth with a bump. Inspired by Neil Woodford’s long-term record, I paid 100p at flotation in April 2015 and topped up at 76p in March this year.
Sad to say, Woodford continues to test investors’ patience with shares trading at 86p and my holding — less than 1% of the fund — showing a 10% loss. Troue told me: “In lots of ways, this trust is what investment is really about — finding people with great ideas and providing capital to develop them. I still think the long-term rewards will be substantial.”
Daimler, the German maker of Mercedes-Benz cars, is a victim of trade wars, with the American president, Donald Trump, throwing more petrol on the fire last week. I paid €63 (£56) a share in September 2016, but since then they have skidded to €58 and a 10% loss. Fortunately, a 6.5% yield serves as a financial airbag to soften the impact.
In summary, I would say this DIY fund management lark is not as easy as it looks before you put your own hard-earned cash at risk. More positively, my experience for good and ill demonstrates the importance of diversification — that is, not having too many eggs in one basket.
Even so, this list of losers shows how high hopes can be dashed by harsh reality. No wonder Square Mile types joke that a stockbroker is a man who invests your money until it is all gone.
I would say individual investors willing to do the work and accept responsibility when things go wrong can reasonably consider running our own fund, or part of it. But we must remember that it is always better to laugh than cry because, sooner or later, we will probably do both.