Reminiscences of a Stock Market Operator is a book which tells the story of legendary Wall Street trader Jesse Livermore and is a must read for serious investors. Over the course of the book many lessons can be learned by the reader including the concept of 'cutting your losses and letting your winners run.'
In this previous article I highlighted broker UBS's views on the recent reporting season, including some of the companies it felt had produced strong results. Now we turn our attention to three stocks UBS singled out as producing disappointing results.
- Treasury Wine Estates Ltd (ASX: TWE) reported flat revenue and a 20% decline in underlying profit to $113 million largely due to an industry-wide oversupply situation in the USA and lower-than-expected wine consumption in China.
- Tatts Group Limited (ASX: TTS) – unlike its peer Tabcorp which was considered by UBS to have had one of the strongest results, Tatts has found itself on the list of disappointers. The lottery and wagering group reported a 2.8% fall in revenue and a flat underlying profit of $226.6 million which was below consensus.
- Leighton Holdings Limited (ASX: LEI) reported a 20% drop in profit to $291 million for the first half with guidance for the full year maintained at a rather wide range of $540 million to $620 million.
The past 12 months have seen Treasury and Tatts underperform the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), while Leighton is up an outperforming 28%. Reporting season is an ideal time to reassess your portfolio holdings. Mistakes happen – often the best thing to do is to admit you made an investing mistake, sell and move on to a more attractive opportunity. Meanwhile, with your winners, let your profits run.
