Until the beginning of 2012, my own business had first call on both my time and available capital. I recently sold that business and I am building a portfolio to eventually see me through retirement.
So far, I am generally doing well. But I have to admit that amongst the winners I have also managed to pick a few stinkers. Deciding what to do with these is a common problem for all investors.
The game changer that ran out of fuel
My first non-optimal choice was Ceres Power Holdings plc (LON:CWR) – a company listed in London that was going to revolutionize the domestic energy market with a small fuel cell. In September 2012 the company failed to raise additional capital and announced that it was planning to wind up. The shares lost 85% of their value.
I decided that the investment thesis was broken and sold at a loss. Now, new investors are on board trying to revive this corpse. If I had held on I could have recouped most of my loss. But I am happy with my decision. I had no way of seeing the future, and at the time an 85% loss was better than a 100% loss.
The ETF innovator
Another of my investments headed for losses was WisdomTree Investments, Inc. (NASDAQ:WETF). The company is looking to disrupt the ETF market by producing innovative funds that are better targeted than traditional index funds.
I bought the stock at $8.33 in March 2012 and watched it sink to $5.95 in December. At that point I considered whether my investment thesis had changed, and I read the coverage on the general Fool site and on my paid services. On the basis that nothing had changed, I decided to hold the stock and considered adding more. The stock was held in a funds-limited ISA account (a UK tax shelter). As it was not one of my strategic holdings, I decided against either selling another stock to add more, or starting a separate position in another account.
In 2013 the Japanese market started rising and Wisdom Tree’s hedged Japanese fund suddenly became popular. The share price recovered and has since marched on to highs of $13.85 at one point, settling back to $11.78 at the time of writing – a gain of over 40%.
I see a bright future for this disruptive stock. I’m very happy that I held my nerve when the price was sinking and somewhat wistful about my decision not to add below $6.
The natural gas revolution
In March 2012 Westport Innovations Inc. (USA) (NASDAQ:WPRT) was at $46.11 and taking off. Westport Innovations Inc. (USA) (NASDAQ:WPRT) produces natural gas engines for trucks, heavy plant and railway engines. It is at the forefront of a game changing revolution and I had to get in quick! Naturally, as soon as I invested the stock immediately started tanking.
When the stock hit $39, I thought my luck was in. I had a chance to buy more of this great stock at a cheap price, so I bought at $39.23. The stock plummeted hitting $22.55 in May 2012.
Peter Lynch advises, “Don’t try to catch a falling knife”. Exactly the mistake that I made when I bought Westport Innovations Inc. (USA) (NASDAQ:WPRT) at $39 - I should have waited. But since then I have purchased additional positions at $26.87, $34.17, $25.10 and $29.54. “Why?” you may ask, “the stock is a proven loser”.