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While reviewing my stocks and Shares ISA portfolio at the weekend, two stocks stood out. Unfortunately, not in a good way.
One FTSE 100 The stock has plummeted 48% since I invested (twice!) last year, while the other one is down 61%.
Now I'm wondering if I should cut my losses and invest elsewhere.
A possible wait of six years
First is ocado (LSE: OCDO). The online grocer's shares have fallen a shocking 55% so far this year.
This makes it the worst-performing Footsie stock of 2024, and it's not even close. In second place is Santiago Squarewhose shares have dropped “only” 29% so far this year.
With a market capitalization of just £2.8bn, Ocado could soon be relegated to mid-cap. FTSE 250.
I invested because I am bullish on its technology and robotics unit, which helps boost the online operations of global grocers, including Hands and Japan EON.
In fact, Ocado now has partnerships in seven of the world's top 10 online grocery marketplaces. This technology Solutions division grew 44% in its last fiscal year.
However, the group as a whole remains unprofitable. Last year it posted a pre-tax loss of £403m. And its chief financial officer said it expects to turn a pre-tax profit in the the next six years.
Wow. This is a long wait for potential profits, something that investors have clearly rejected.
A failed business model
The second action is Ginkgo Bioworks (NYSE: DNA). Shares of the synthetic biology company are down 71% over the past two years.
For those who don't know, Ginkgo programs microbes on behalf of its customers. These include Nordisk, Pfizerand merck.
Like Ocado, the company is not profitable. It lost $178 million in the first quarter. And while it added 17 new cellular programs, representing 31% growth from a year ago, its $38 million in revenue missed estimates by $8 million.
Meanwhile, it lowered its full-year cellular engineering services revenue forecast to between $120 million and $140 million. That would represent, at best, a year-over-year growth of $1 million.
For context, when the company went public in 2021, it expected $628 million from this segment.
This tells us that the business model is not working. If you add more programs from large pharma clients, but your revenue doesn't increase, then that's a serious problem.
To address this, management is cutting costs and changing the way its contracts are negotiated.
One saving grace is that the company still had a cash position of $840 million at the end of the quarter. It aims to breakeven on adjusted EBITDA by the end of 2026.
However, given the terrible execution so far, I'm not going to hold my breath.
weeds and flowers
Warren Buffett likes to quote an analogy used by Wall Street legend Peter Lynch: “Weeds become less important as flowers bloom. Over time, it only takes a few winners to work wonders..”
Fortunately, along with these rags, I have actions like Axon Company, Games workshopand Free market. They have all been wonderful long-term winners for me.
These flowers more than make up for the weeds!
Here another Peter Lynch quote comes to mind: “Selling to the winners and retaining the losers is like cutting the flowers and watering the weeds..”
As things stand, I'm certainly not going to give water to these wallet losers. In fact, I'm tempted to withdraw them and invest in stocks with better prospects.
