It’s always a source of great pain to investors when they spot a good-looking stock, research it thoroughly, decide not to buy it, and then watch helplessly from the sidelines as the share price shoots through the roof.
2019 was a year of good wins for me in the stock market. Games Workshop is up 40% since I bought it, while my long-term holds Aviva and Legal & General both returned tidy dividends nearing 7%.
And yet there have been a few misses that have niggled at me.
The one that got away
Often I will research a stock, see that it is in a booming sector with great growth potential, dig through the balance sheet to look for structural weaknesses like an over-reliance on intangible assets, or heavy liabilities that can’t be met by short-term cash flow, and see what my gut tells me about how the company is run.
I was watching one stock earlier in the year, a not particularly well-known FTSE 250 firm called Clipper Logistics (LSE:CLG). When I first came across it, the share price was 192p. As I watched from the sidelines throughout the year this grew to 220p, then 250p, then 290p. It operates in ‘e-fulfilment’ – another name for the warehousing, delivery, customer credit checks, and returns for online sales giants like Amazon, ASOS, ASDA, and Sports Direct.
Chair Steve Parkin said earlier this year that the business is “exceptionally well-placed to benefit from the continuing migration to online retailing and the increasing propensity for consumers to choose click-and-collect services when placing orders online.”
If you want to make money from a gold rush, invest in the companies making the picks and shovels, right?
Well the boom in the e-commerce sector still looks like a gold rush to me with the explosion of online-only retailers Boohoo (up 83% this year) and ASOS (up 47% this year).
Leeds-headquartered Clipper has put together solid growth since going public in 2014. A period of momentous growth saw the share price quadruple to its 2017 peak, before falling back to a more sustainable entry point for retail investors like you and me.
Clipper’s fundamentals looked sound and it announced a series of big contract wins in 2019, including a five-year deal to provide returns management for Shop Direct, the operator of Very.co.uk and Littlewoods.com, and expansion to a new e-fulfillment centre for Boohoo brand Pretty Little Thing.
Why didn’t I buy it?
I’d never heard of Clipper before I started looking at it as an investment. I shouldn’t have let this lack of public profile cloud my judgement.
I was also a bit sniffy about the logistics sector. This swiftly changed in 2019 when I fully researched the Amazon warehouse supplier Tritax Big Box.
Clipper is now in a bid situation: it appears Parkin wants to take Clipper private and according to press reports is working on a £300m bid with the help of Sun Capital Partners.
What I’m doing to change it
My first new year’s resolution will be to truly trust my gut. If I get the feeling, based on fundamental research and sector trends, that a stock is a buy, then I will buy.
Secondly, and this is probably the biggest resolution: to earn more money so I can invest in the good opportunities I spot in the market!
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Tom Rodgers owns no share mentioned. The Motley Fool UK has recommended Clipper Logistics. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020