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As of July 2022, my wife and I bought 27 new shares: 15 FTSE 100 actions, five FTSE 250 actions and seven S&P 500 holdings. While some picks have outperformed the market, others have turned out to be flops. What should I do with my losers? Do I hold on to them or give up and sell them?
Three dogs of the FTSE 350
Three of our worst performers are well-known FTSE 350 stocks, and each company is a household name. Here they are, ordered from highest to lowest loss:
| Company | Sector | Price paid | Actual Price | our loss | One year change | Five year change |
| Vodafone Group | Telecommunications | 89.4p | 74.77p | -16.4% | -22.5% | -51.8% |
| International Distribution Services | postal services | 272.8p | 240.2p | -12.0% | +1.2% | -29.4% |
| Direct Line Insurance Group | Sure | 201p | 180.75p | -10.1% | -14.1% | -43.6% |
Vodafone Group is one of the largest telecommunications companies in Europe. International Distribution Services – previously royal mail — has been providing postal services since 1516. And Direct Line Insurance Group has been selling insurance policies in the UK since 1985.
On the other hand, just because a company is well known and has a storied history doesn’t mean it is currently well managed. In fact, while longevity can be an advantage for companies, it is no guarantee of a profitable future. (Remember Woolworthsthe UK store chain that collapsed in 2009?)
Water the roses, pull the weeds.
As I pondered which stocks to cut, I remembered a quote from an acclaimed American fund manager. While managing the Fidelity Investments Magallanes Fund Between 1977 and 1990, Peter Lynch built it into the world’s best-performing mutual fund.
In his 1989 book One up on Wall Streetwrote Lynch, “Some people automatically sell the ‘winners’ (stocks that go up) and hold on to their ‘losers’ (stocks that go down), which is as sensible as plucking the flowers and watering the weeds.”
So, as an ‘asset gardener’ with my family portfolio as a garden, what weeds do I pull out and what plants do I tend to to recover?
I’m not interested in IDS
My test for this dilemma is simple: I ask myself if I would buy this stock today. For the IDS, the answer is no. This FTSE 250 business (and its share price) has been rocked by strikes that wiped out profits during long industrial actions.
Although these strikes are over (for now), Royal Mail is limping along, with IDS delayed by GLS, the group’s profitable European delivery service. While the board is confident of a rebound, I wish we had sold when the stock briefly hit our purchase price on July 20. If it returns to these levels, it is possible to sell.
Dividend disaster
One of the reasons for the decline in IDS and Direct Line share prices is that both companies canceled their dividends. These payments were the main reason we bought this FTSE 250 stock. That said, I think Direct Line could be a real recovery play, which is why I won’t be selling this stock in 2023.
Finally, Vodafone is undertaking a radical restructuring under new CEO Margherita Della Valle. I am willing to give him the benefit of the doubt, so that this action sticks. However, if I see new signs of weakness in any of these three FTSE 350 companies, I won’t hesitate to pull out the weeds!
