Sometimes, you have to give up on a stock as the road back to respectability is too long, bumpyand uncertain. Why persevere when there are more rewarding journeysto be had? I sold these two three years ago and havent looked back. Can they enjoy a brighter future?
Tesco no-go
Remember when grocery chain Tesco (LSE: TSCO) wasseen as an unstoppable global behemoth destinedto consume the world? That was another time. Tescos share price is 60% lower than it was five years ago. Incredibly, its also 50% lower than it was 10 years ago. Thats right, in May 2006 it traded at 319p. Today you pay around 162p. The last decade has been thoroughly forgettable for Tesco investors, just ask Warren Buffett, who names it as one of his biggest mistakes ever.
Incomingboss Dave Lewis wiselyairedall thedirty laundry he could find, so no one can accuse him of having muckydrawers. Hes abandoned misguided turnaround solutions, such as Harris+Hoole coffee shops and Giraffe in-store restaurants. The private jets have gone. Surplus food lines have been axed. Multi-buys put out of their misery.Store expansion plans shelved. Margins slashed in a bid to fight back against the discounters.
So where does hego next?In that respect, were all a little inthe dark. Lewis has cleared out the dead wood, but how will he deliver fresh growth? Online? Non-food? Who knows? With the stocktrading at 48 times earnings and no dividend, I wouldlike to see that the man has a plan before I would consider buying Tesco again.
Right royal roasting
Few will forget howRoyal Bank of Scotland Group (LSE: RBS) fellfrom grace in the wake of the financial crisis, with ashare price that once topped 60 crashing to around 2 as the full horror of the banking crisis unfolded. What didsurprise me, looking at a 10-year performance chart,is how the share price has virtuallyflatlined since then. At todays 233p, RBS trades at exactly the same price as it did on 30 March 2009, more than seven years ago. Signs of progress have been completely illusory. Could the next seven years be just as bad?
The great RBS clean-up continues to drag on. Despite reportingan overall profit of 421m in the first quarter, it still postedastatutory loss of 968m after debitingtoxic debris. This looks set to happen on repeat.
While RBS management is working to build a strong, simple and fair bank for both customers and shareholders and boastsa common equity tier 1 ratio of 14.6%, it cantescape the past. The next set ofresults islikely tobe tarnished by the costs of litigation relating to its historic US mortgage market activities, while even the divestment of subsidiary Williams & Glyn is running behind schedule. The lesson is that everything at RBS takes longer than you think. It wont be a disaster zone forever, but it looks set toremain an investor wastelandfor some time to come.
The future is bright, so don’t waste time on yesterday’s men.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
