Is it time to sell Elders?

It's time for investors to get real about Elders' future.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Elders (ASX: ELD) CEO Malcolm Jackman announced the company's half-yearly results last week and Elders' shareholders should take the time to review the results and consider whether it is in their best interests to remain invested in the stock.

Once a large and iconic company, Elders has been reduced to a fragment of its former self. For shareholders, that can cause a number of emotions which can affect their judgement.

Some Elders investors may be long-term holders, perhaps farmers whose family has done business with Elders for generations. These investors may remember the company's glory days and still hold out hope of those days returning. Emotionally attached shareholders run the risk of 'falling in love with the stock', and this is dangerous as it can stop an investor from rationally weighing the pros and cons of a business.

Another potential emotional issue investors' face is becoming fixated on a price. Investors can become so tied to the idea that they must at least breakeven on a poorly performing investment that they effectively fall in love with their purchase price. Elders shareholders need to act objectively, faced with the financial evidence they have before them today. Remaining wedded to a purchase price, or planning to hold out "just until I get my money back" is not a rational or sensible investment strategy.

The concept that investors need to remember here is you don't have to make the money back the way you lost it. In investing there is no rule that what goes down must come back up. Investing requires investors to make trade-offs. In this case, investors need to determine if Elders stock will give them the return they are seeking or whether they would be better off using those funds to investing in more promising stock ideas.

A third important concept to be aware of is acknowledging your circle of competence. There is a chance Elders will continue in its current corporate form and there is a chance Ruralco (ASX: RHC) will be the white knight that rides in. However shareholders need to judge the likelihood of these scenarios. There is also the very real chance that capitalism will have its way and existing shareholders, along with Elders Hybrid (ASX: ELDHA) holders and a decent chunk of the debt holders too, could get wiped out altogether. The complexities of the situation and chance of survival at this point, even for insiders with knowledge of ongoing discussions with Elders' bankers, should make investors question whether it is really within their circle of competence to fully understand the risks they are taking.

Foolish takeaway

Capitalism is built on survival of the fittest. While some companies survive and prosper, unfortunately many others don't. The agricultural sector has had its share of struggles. PrimeAg Australia (ASX: PAG) has put itself up for sale after trading below its net tangible assets for too long. An important part of good investing is good portfolio management; investors should re-evaluate their portfolio from time to time and be open to changing their minds when the facts change.

In the market for high yielding ASX shares? Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading


Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »