News flashed across my screen at the beginning of the year that Anglo American (LSE: AAL) was the best performing FTSE 100 stock in 2016 returning 289%.
Not bad for a large cap.
Here’s what that looks like on a price chart:
A pretty impressive run.
What’s even more impressive is that AAL today is worth £16.28 billion.
Not bad considering that AAL was the one of the worst performing stocks in 2015 but it illustrates a good point.
Yesterday’s losers become tomorrow’s winners.
AAL’s decline was severe: in February 2011 its share price reached just shy of £35 and maintained a steady downward trajectory until January 2015 when it hit £2.32 or -93% over four years!
That sort of price decline is hard to take and hard to invest in considering that 2015 pre-tax profit was -£3.5 billion as well. But if you have the stomach then massive gains are at hand.
So losers like this are a value investor’s potential future winner and just shows how much patience is required to follow the value code.
Other notable losers on the London Stock Exchange in 2016 were:
- Capita (LSE: CPI),
- Next (LSE: NXT)
- Easyjey (LSE: EZJ)
- Dixons Carphone (LSE: DC.)
- Royal Bank of Scotland (LSE: RBS)
- International Consolidated Airlines (LSE: IAG)
- Travis Perkins (LSE: TPK)
- Barratt Developments (LSE: BDEV)
- Berkely Group (LSE: BKG)
- ITV (LSE: ITV)
What’s apparent is the amount of names associated with the housing sector on this short list of losers along with airlines.
Lufthansa Price Chart
Traditionally airlines are avoided by value investors like the plague due to the economics of their industry.
But one look at the chart of Lufthansa shows the violent nature of the share price at least.
If you know the history of Lufthansa’s fortunes it is not surprising that it’s share price chart looks so choppy.
It is a classic company that suffers regular bouts of the type of mayhem I like to see a large company go through because it can sometimes provide an opportunity to buy stock with a large enough margin of safety.
According to Bloomberg Lufthansa’s current PE Ratio (TTM) is 3.26 and the gross dividend yield is 3.97%.
Easyjet’s PE is 9.5 and its dividend yield is 5.38% and from a quick glance at the last five years worth of financial data earnings fell by 21.9% for fiscal year 2016 citing loss of market share, terrorism events, higher holiday costs for consumers, strikes and severe weather.
Easyjet also forecasts a decline in revenues in 2017 like other stocks I’ve recently covered.
And that’s the thing: there always seems be be trouble either in the moment or at some point in the future that the company itself has alluded to.
This is why sound judgement is essential at every moment before the buy button is pushed and massive amounts of patience afterwards.
As a consequence of misfortune many of these stocks are on my radar and will likely be purchased going into 2017.