The hockey playoffs have begun again, and, yet another year sees the Toronto Maple Leafs packing their bags and heading to the golf course early. Their dismal year and lack of a playoff berth makes for another year of disappointment for fans. Forty-four years without a Stanley Cup is bound to depress even the most dedicated fan.
Not me, though. I gave up on the Leafs years ago. For the last 10 years, in fact, I have enjoyed a stress-free spring, not watching, nor caring, whether the Leafs made the playoffs. I saved a bunch of money, time and stress.
What do the dismal Leafs have to do with the stock market, you may ask? Well, there’s a lesson to be learned for investors here. Sometimes, no matter how much you like a stock, if it doesn’t perform, it might be better to let it go. Like a Leaf fan, letting a poorly-performing stock go might save you a bunch of money, time and stress.
Now, I do believe in investing for the long term, although that’s something that hasn’t really worked in the stock market recently, what with all the bubbles, crashes and debt issues worldwide. However, like the Leafs, at some point, you simply have to let go. What’s the appropriate time frame to wait for a stock to do something? Well, that’s a personal decision. Some value investors, for example, might be willing to give a stock 10 years before throwing in the towel. Because I believe there are always money-making ideas in the stock market, though, having your capital tied up for that long might seriously impair your ability to make money elsewhere.
This stock market cycle may be a little unusual for investors trying to decide whether to hold or sell, though, because stocks really haven’t done very much for investors in general over the past decade. You might need to decide if one of your stocks is really a loser, or just a victim of market circumstances.
That being said, let’s look at a few companies whose share price has disappointed investors for years, as the Leafs have disappointed fans. We make no call on the quality of neither these companies nor their future prospects, just, factually, that their price performance has been horrible for a long period of time.
Let’s start with gold stocks. Now, as you know, gold has gone up for 11 years in a row. There are plenty of gold stocks that haven’t enjoyed the rally, however. Take Golden Star Resources Ltd., for example. Its share price (all data from Bloomberg LLP) in late 2003 ranged from $5 to above $10. Golden Star’s share price today: $2.95.
Also in the gold sector, how about Jaguar Mining Inc.? Seven years ago this week, Jaguar traded in the $5.25 to $5.80 per share range. Today? You can get those same shares for $5. Sure, there have been times when the stock price has risen dramatically, but long term shareholders haven’t made much, if any.
In other sectors, how about Labopharm Inc.? Nine years ago, the stock traded above $10 per share, as it rode a wave of optimism on drug approvals and revenue growth. Today, the stock is below $0.50, down 55% this year alone. The company recently laid off one-third of its staff, which is typically not a positive sign.
Cymat Technologies Ltd., a maker of aluminum foam for various applications, is another longer-term underperformer. Its share price traded well above $4 per share ten years ago this week, yet today is $0.14 per share. Certainly it is tough to try to develop an entire new industry, which is what Cymat is doing, but if I was a shareholder my patience would be wearing out.
On the U.S. side, check out Intel Corp. Seven years ago, well before any financial crisis, government debt issue, or Japan’s Earthquake, Intel shares traded above $30. Now, sure, Intel’s go-go growth days are long behind it. But still, the stock is below $20 now, down 6% already so far this year. At least, however, it pays a dividend to long-suffering shareholders, with a 3.7% yield these days, so at least you get paid to wait for better times.
Maybe this exercise only tells us that buy-and-hold investing is dead. Still, in the past 10 years there have been many companies — such as Netflix Inc., Priceline.com Inc. or Green Mountain Coffee Roasters Inc., that have consistently rewarded long term investors.
Now, these companies whose shares have been weak may be about to take off, and this list may not be predictive of future results. But, the facts are, these companies have done nothing for investors over a long period of time. Kind of like the Maple Leafs’ performance for their fans. At some point, you do need to decide how long you are willing to stand behind a team— or a stock.
Not me, though. I gave up on the Leafs years ago. For the last 10 years, in fact, I have enjoyed a stress-free spring, not watching, nor caring, whether the Leafs made the playoffs. I saved a bunch of money, time and stress.
What do the dismal Leafs have to do with the stock market, you may ask? Well, there’s a lesson to be learned for investors here. Sometimes, no matter how much you like a stock, if it doesn’t perform, it might be better to let it go. Like a Leaf fan, letting a poorly-performing stock go might save you a bunch of money, time and stress.
Now, I do believe in investing for the long term, although that’s something that hasn’t really worked in the stock market recently, what with all the bubbles, crashes and debt issues worldwide. However, like the Leafs, at some point, you simply have to let go. What’s the appropriate time frame to wait for a stock to do something? Well, that’s a personal decision. Some value investors, for example, might be willing to give a stock 10 years before throwing in the towel. Because I believe there are always money-making ideas in the stock market, though, having your capital tied up for that long might seriously impair your ability to make money elsewhere.
This stock market cycle may be a little unusual for investors trying to decide whether to hold or sell, though, because stocks really haven’t done very much for investors in general over the past decade. You might need to decide if one of your stocks is really a loser, or just a victim of market circumstances.
That being said, let’s look at a few companies whose share price has disappointed investors for years, as the Leafs have disappointed fans. We make no call on the quality of neither these companies nor their future prospects, just, factually, that their price performance has been horrible for a long period of time.
Let’s start with gold stocks. Now, as you know, gold has gone up for 11 years in a row. There are plenty of gold stocks that haven’t enjoyed the rally, however. Take Golden Star Resources Ltd., for example. Its share price (all data from Bloomberg LLP) in late 2003 ranged from $5 to above $10. Golden Star’s share price today: $2.95.
Also in the gold sector, how about Jaguar Mining Inc.? Seven years ago this week, Jaguar traded in the $5.25 to $5.80 per share range. Today? You can get those same shares for $5. Sure, there have been times when the stock price has risen dramatically, but long term shareholders haven’t made much, if any.
In other sectors, how about Labopharm Inc.? Nine years ago, the stock traded above $10 per share, as it rode a wave of optimism on drug approvals and revenue growth. Today, the stock is below $0.50, down 55% this year alone. The company recently laid off one-third of its staff, which is typically not a positive sign.
Cymat Technologies Ltd., a maker of aluminum foam for various applications, is another longer-term underperformer. Its share price traded well above $4 per share ten years ago this week, yet today is $0.14 per share. Certainly it is tough to try to develop an entire new industry, which is what Cymat is doing, but if I was a shareholder my patience would be wearing out.
On the U.S. side, check out Intel Corp. Seven years ago, well before any financial crisis, government debt issue, or Japan’s Earthquake, Intel shares traded above $30. Now, sure, Intel’s go-go growth days are long behind it. But still, the stock is below $20 now, down 6% already so far this year. At least, however, it pays a dividend to long-suffering shareholders, with a 3.7% yield these days, so at least you get paid to wait for better times.
Maybe this exercise only tells us that buy-and-hold investing is dead. Still, in the past 10 years there have been many companies — such as Netflix Inc., Priceline.com Inc. or Green Mountain Coffee Roasters Inc., that have consistently rewarded long term investors.
Now, these companies whose shares have been weak may be about to take off, and this list may not be predictive of future results. But, the facts are, these companies have done nothing for investors over a long period of time. Kind of like the Maple Leafs’ performance for their fans. At some point, you do need to decide how long you are willing to stand behind a team— or a stock.
