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One thing I can confirm is that choosing my own investments is never easy, even after 35 years of practice. Sometimes, I buy stocks and they skyrocket. Every once in a while, I buy a dog and it crashes. Perhaps this is why so many investors prefer to buy the entire market through cheap index tracking funds. For example, here is a story of a howler, a FTSE 250 a part I bought recently that blew up in my face.
We bought 17 new shares
In the last seven months, my wife and I have purchased a total of 17 new shares. These comprise seven FTSE 100 shares, three FTSE 250 shares and seven US shares. We bought the 10 UK stocks to generate additional dividend income, while the seven US stocks were a bet on global growth and recovery.
All but one of our new US holdings were purchased on November 3, a week before the US midterm elections. The good news is that these six stocks have posted solid gains since then, especially the four megagiants technology that we buy for its large size and strength.
A FTSE 250 flop
Elsewhere in our new portfolio, our FTSE 100 stocks mostly show early gains on paper, with the notable exception of a real estate stock that has tumbled. But most disappointing so far has been the appearance of our new FTSE 250 shares, only one of which beat our purchase price. Here is a FTSE 250 dip that disappointed me sorely.
Direct line dives
At its 52-week high, Hotline Insurance Group (LSE: DLG) shares hit 312.7 pence on February 10, 2022, two weeks before Russia invaded Ukraine. After they fell below £2 last summer, we bought some shares at the end of July for just over this level.
Initially, the stock rallied, rising as much as 15% or so above our purchase price. But in a business update published on January 11, the group announced it was scrapping its cash dividend to rebuild its ailing balance sheet. This grim news sent the stock falling almost a quarter (-23.5%) that day. Urgh.
To be honest, I was furious with this decision, because the CEO of the insurance group had declared in November that the Direct Line dividend was certain. Then a blast of extremely cold weather in December saw his insurance claims skyrocket by £90m. One piece of good news is that CEO Penny James resigned on Friday, most likely at the request of angry shareholders (including me).
On Friday this FTSE 250 share closed at 173.8 pence, down 43.1% in a year and 13.2% below our purchase price. So what initially started out as a good buy has turned into a disappointment. I guess that’s just one of the dangers of investing in stocks during periods of volatility.
This latest news has reduced the company’s market value to less than £2.3bn, a far cry from the days when it was a FTSE 100 company. Encouragingly, this stock rallied 7.3% from its trough. of 2023 of 161.95 pence on January 11. In short, although the dividend is gone, the CEO’s departure offers some hope of change. So I’ll stick with this non-dividend FTSE 250 stock for now, despite my losses to date!
