In a year when the S&P/ASX 200 Index (ASX: XJO) has risen more than 10.6%, there are still some popular ASX shares that have caused investors to tear their hair out.
Unfortunately, for amateurs and professionals alike, knowing when to sell shares of failing companies is easier said than done.
Shaw and Partners portfolio manager James Gerrish analysed some of the "laggards" in his flagship growth portfolio this week and related to this dilemma.
"Unfortunately when companies come out with downgrades it can be hard to exit at optimum levels as they tend to gap lower," he said in his Market Matters newsletter.
"We may have enjoyed a solid year but these positions have been the major detractors on this portfolio's P&L."
Let's take a look at 3 ASX shares that have stunk in 2021, and what Gerrish would do with them:
Image source: Getty Images
Appen's risk-reward okay now
Technology company Appen Ltd (ASX: APX) sure has been a pain in many investors' portfolios in recent times.
Just this year alone the share price for the artificial intelligence service provider has plunged 62%.
It didn't help that in late November the stock fell more than 20% in 2 trading days. This was triggered by Macquarie Group Ltd (ASX: MQG) research, which was concerned that Appen hadn't yet provided a year-end guidance and a trend of its big clients bringing its services in-house.
Gerrish agreed that both points made sense.
"The markets certainly backed the Millionaires' Factory on this one," he said.
"The question is how much potentially bad news is baked into this particular cake and can we see another spike back up towards $15 (i.e. our initial target)?"
Appen closed Thursday at $9.72.
Gerrish would like to cut Appen loose soon.
"We feel the risk-reward is ok around $9.50 but at this stage we are looking for an exit moving into 2022 rather than averaging our position here."
Is there anything more infuriating than A2 Milk shares?
Dairy producer A2 Milk Company Ltd (ASX: A2M) has infuriated shareholders so much that it will now be defending itself against 2 class actions from its own investors.
After touching $20 back in July 2020, the stock closed Thursday at a sorry $5.63.
After buying in at around $8, Gerrish said he doesn't intend to buy any more A2 Milk shares now but is optimistic in the short term.
"While there's nothing comforting about A2 Milk trading sub-$6, we can see another spike into the $7 to $8 region, at least as new management starts to get some runs on the board after completely re-basing earnings at their most recent update, while corporate appeal can't be ignored."
His team will then look to exit once it hits those levels.
An ugly spring might turn into an awesome autumn
Many Australian investors looked to Virgin Money UK CDI (ASX: VUK) this year as a post-pandemic recovery play in Europe.
But after hitting a 52-week high in September, the shares have lost almost a quarter of their value. The Virgin stock price lost an eye-watering 11.3% in just one day last month after a financial update.
It closed Thursday at $3.10.
"The stock's cheap because the market clearly lacks confidence that the company can deliver on their digital transformation and cost out strategy moving forward," said Gerrish.
Despite the UK returning to COVID-19 restrictions this week, his team reckons "a resurgence" will be coming in the new year and will "likely" be retaining its position.
