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By Rob Carrick
Globeinvestor
Wednesday, May 07, 2008
OTTAWA (Globeinvestor GOLD) -- A bizarre strain of masochism is evident in the portfolios of some investors.
Adrian Mastracci, “fee-only” portfolio manager at
KCM Wealth Management in Vancouver, says, "They were purchased when the tech boom was in full sway."
How do you to explain the way people hold onto stocks that turn out to be disastrous choices? Nortel Networks is an obvious example, but there are plenty more. Though they’ve plunged in value, these stocks are loyally held by investors who would do better to sell and redeploy the money more productively. With spring at hand, make a point of checking to see whether there’s any trash in your portfolio that needs to be taken to the curb.
Just how common this problem of hanging onto loser stocks is, became evident in an e-mail exchange I had recently with the Vancouver-based portfolio manager Adrian Mastracci. He mentioned that now was a good time for investors to do some spring cleaning in their portfolios and I asked him for some examples of the kind of stocks he was talking about. Mr. Mastracci obliged with a list of five onetime technology darlings that he’s seen in the portfolios of new clients in the past year or so. All were purchased when the tech boom was in full sway. These stocks include the following.
Nortel (NT-T): After peaking at $124.50 in 2000, this stock has fallen to the $8.50 range, and that’s after a 10:1 share consolidation about 18 months ago. Some Nortel watchers saw some positive signs in the company’s recently announced first quarter results, but there was still a loss of $138-million (U.S.).
JDS Uniphase (JDSU-Q, JD-T): Another big-name hero of the tech boom gone rancid. The sad thing here is that this stock just keeps on falling. In the past month or so, it has lost about 25 per cent of its value.
Palm (PALM-Q): The developer of the famed Palm Pilot has endured a sharp reversal of fortune since its heyday in the tech boom. According to a calculator on the company’s website, $1,000 invested on Oct. 1, 2000, would be worth $16.04 today.
Two other three tech stocks Mr. Mastracci has found investors clinging to are PMC Sierra and Yahoo, both of which are way off their record highs.
Why bother purging stocks like this from your portfolio if you’ve been riding them lower for years? For one thing, you’ll remove some pointless clutter from your monthly account statements. Second, you’ll have an opportunity to buy something sensible with the proceeds of the sale. That’s the best legacy you can hope for from stocks that have abused your loyalty.
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