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Sell the dog
Valued Contributor
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Sell the dog

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We all have one. That share we bought that was going to go to the moon and make us a fortune. But the price collapsed and the only hope for recovery is a miracle. Now every tie you log onto OST you see it and it taunts you.

It's usually one of our first purchases and we don't sell it for a bunch of reasons, and they're all bad reasons. The reality is this share is unlikely to ever make you money, not even a modest amount. But we're hurting. Hurting because we got it wrong. Hurting because we lost money. Hurting because we want to be rich and we're not.

So, get rid of the hurt. Sell the dog. It's not going to make you rich, it just causes pain.

Sell it, delete it from your watch list and never look at it again. When somebody on BusinessDayTV talks about it change cannel for five minutes. Make it gone from your life.
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Here's my dog story.

Way back, 1996 if I recall, Brainware listed at 100c a share. I got 20,000 in the IPO and watched it storm to around 600c. But I never sold because this one was the winner that I would retire on. Then the bubble burst and the stock collapsed. Eventually it did a 50:1 consolidation and was finally taken over and changed to Southern Electrical Company. Finally, a few years ago it delisted and I got paid out around R50 for my R20,000 investment.

But at least my dog is gone and the hurt is also gone.

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4 Comments
Frequent Contributor

Of course if  the truth be known its not only dog shares that one should rid yourself of - its pretty well anything that  turns out to be intrinsically worth less than you paid for it. But lessons are there to be learnt and the wisdom accquired should never be dispised. These days I do my best to apply the following wisdom to matters like this - wisdom which I accquired at an unfortunately high cost. I was living in Dublin at the time when I  bought what I thought was a bargain at a country house sale - all the surrounding information told me that I was going to make a lot of money on its resale. The auctioneers were Dublin's best, the owner and provenance seemingly impeccable and the catalogue expensive. I had done my research and into the history of the item. ( As it happens I collect the item purchased and so I was (or so I thought ) combining information with knowledge to acchieve what held out to be a good financial result for me. Sadlyit turned out to be a complete dog. "What shall I do? " I wailed to the one expert who had conclusively revealed the shortcomings of my purchae to me. "Sell it, cut your losses and move on. It is what it is and in 5 years time it will still be worth what its worth now". I took the advice -  and never forgot it. Needless to say this principle can be applied to most  -if not all situations involving purchase and sale o in life.  

New Contributor

I remember Brainwaire well.I must admit that brainware was also the share that blew my whole acount thinking that Piet de Boer has done it once he will do it again.

I even got family to buy into it.Needles to say i wasnt popular at the time

Frequent Contributor

All this hand wringing begs the question- on a spectrum of Diamond to Dog what markers might be crucial - and so the old perennial question of "what's good and what's bad "

Is it earnings multiples( positive or negative)  - over years - or calls or lack of them on capital or annual growth in NAV?  Simon I think you must develop a  Dog weighing scale of some kind - where

the numbers one to 10 link DIRECTLY to levels of indication of an unwanted Dog in the room  -  one would even avoid weighting them -just indicate proable tipping points.     

And the reason is simply this - as you say - we don't kick dogs out - especially when they are old.

Valued Contributor

Adrain Saville used to do a dogs of the Top40 portfolio at Cannon, way back in late 1990's. It did well enough, but critially was of the Top40, not the market. His metric was buy the losers.

 

Trick is spotting if it's a dog with no hope or just having a rough patch. We ascribe the latter and hence hold on, but many times it actually the former and in all my decades in the market no dog in my portfolio has ever recovered.