prepare for failure when investing. No matter how much research and prep you do, there’s still going to be those times where you make a bad call.
But then, there are other times where you make a really, really bad call. One so bad you can’t necessarily chalk it up to the natural ebb and flow of the markets. One that leaves you wishing you had done something more productive with your savings – like lottery tickets or making a pile of cash and setting it on fire.
So, as the year winds down, here’s a quick look at some of the worst calls you could have made in 2014:
Alpha Natural Resources (ANR)
This is not a great time to be a coal producer. Aside from the tremendous environmental damage caused by coal-fired power plants, and the ocean of bad press for coal companies regarding their labor practices (most of which is earned), there is the new post-shale boom era where natural gas is cheap, plentiful, and absolutely squeezing coal out of the market.
Alpha Natural Resources, though, managed to pile a couple of specific issues into 2014 on top of the generally bad macroeconomic climate to create a real bloodbath for shareholders.
This year saw Alpha settle on a $27.5 million fine and $200 million worth of cleanup costs in March for making illegal toxic discharges into waterways in five Appalachian states – the largest fine ever levied for a violation of water permits. It also announced that it was idling three of its mines in September, then hit a 52-week low in early October as dwindling demand for steel due to China’s slowing economic growth continued to hit home in the form of reduced demand for metallurgical coal.
I can’t say I’m shedding a tear for Alpha Natural Resources, but its investors surely are. The stock’s down almost 80% on the year. How’s that for some coal in your stocking?
Conn’s is a Texas-based electronics store that can trace its roots all the way to the Eastham Plumbing and Heating Company of Beaumont, TX in 1890. In 2014, though, the stock has had a pretty rough year.
Conn’s has seen things simply go from bad to worse, to still worse this year, as they struggle mightily with serious credit problems. Basically, Conn’s business model has been to offer credit to those who can’t necessarily get it elsewhere. Well, those chickens came home to roost in 2014.
Losses from the company’s credit division mounted all year, and reached a fever pitch with the company’s Q3 earnings report on December 9. The company posted a $3.1 million loss, and fell short of expectations on revenue, prompting another major sell-off.
Additionally, the store was hit by a wave of bad publicity after it was featured in the biweekly New York Times column, The Haggler. The original July 3 piece highlighted a customer who claimed to have been charged $751 in interest despite fulfilling all of the requirements for a 0% interest financing deal the store was offering at the time of her purchase. It exposed a lot of bad publicity regarding the customer service at Conn’s, and the piece prompted a slew of negative social media attention that was detailed in The Haggler’s follow-up two weeks later.
Bad credit decision, negative publicity over poor customer service, and sliding revenues usually combine to create really icky stock returns. This case isn’t any different as Conn’s is now off about 80% on the year.
That you haven’t heard of Russian telecom company VimpelCom is a pretty clear sign that you’re not a shareholder. Were you invested in these guys in 2014, I’ll bet you’ve been too busy cursing this name consistently since January.
VimpelCom is based in Amsterdam and incorporated in Bermuda; but it was founded by a Russian, had the honor of being Russia’s first mobile carrier, and currently does a lot of its business in Russia.
So, lemme think, has anything happened in Russia this year that could have disrupted things for VimpelCom? Oh, that’s right, there was that little hiccup involving the Ukraine, which, incidentally, is also a major market for VimpelCom. So, sales have been (way) off for the company all year. The Q2 earnings report showed an 83% drop in profit, year-over-year, and then the Q3 report had a 59% decline.
All told, VimpelCom is worth about a quarter of what it was at the start of the year.
Normally, investments don’t carry tremendous ideological weight. Whether or not you BELIEVE in Wal-Mart (WMT) or not, you’re buying the stock in hopes of creating returns. If they’re not there, you’re getting out.
Not so for bitcoin. The crypto-currency seems to attract a class of evangelists who are dead-certain that bitcoin is the wave of the future. They’re utterly unwilling to listen to any naysayers, particularly those who actually have some expertise in the field of economics. And, well, in 2013 they were looking pretty smart. Bitcoins cleared $1,000 in value.
Not so in 2014. Bitcoin’s long, steady decline from its peak has continued all year long and is now down over half its value from New Year’s Day. On the one hand, bitcoin remains utterly astonishing. Someone completely anonymous made up their existence out of thin air and convinced everyone they were worth something. He/she’s like the L. Ron Hubbard of finance.
Still, the other side of that, err, coin is that no one really knows who owns how many bitcoins, making the entire currency open for incredible abuses. Which may have something to do with the steep, steep sell-off the currency’s suffered through this year. Bad as it is, though, anyone who’s been in from the start still has reason to feel incredibly happy.
Crude oil was slipping for most of the year, but anyone who was heavily invested in Brent or WTI futures likely started to really feel the sting starting in September.
In short, people seem reasonably sure that OPEC member nations, sick of the influx of WTI crude flowing from the American shale boom, decided to make a big move to knock out the frackers once and for all. By flooding the market with oil, they could lower the price beyond the break-even point for American producers using the much costlier hydraulic fracturing technique and cause a steep decline in production. For a country like Saudi Arabia, sitting on massive reserves, the move makes sense. Better to maintain greater control over global prices in the long run and eat some short-term loss of profit. Once American producers are laid low, you can just close off the flow again and reap your rewards.
In the meantime, though, it’s pretty bad news for producers like Russia and, well, anyone else who was counting on oil staying over $100 a barrel. Prices have plummeted below $60 a barrel and appear to be staying there and/or going lower. So enjoy that $2 a gallon gas while it lasts, because this price war likely isn’t a permanent shift.
Not a good year for Russian oil billionaires, that’s for sure. As noted above, crude oil is in a freefall without a clear sense of what the bottom could be. For a country that relies on oil and gas for 68% of its export, that is NOT good news. And, as if that wasn’t enough, Russia appears to be in the midst of what seems to be a fairly severe inflationary crisis.
Things were bad prior to mid-December, but they got a whole lot worse on December 16th after the ruble shed an additional 19% of its value against the dollar and prompted an emergency meeting of the central bank who then called for a itsy bitsy rate hike to try and stabilize things somewhere in the ball park of 650 basis points.
No big deal, right? What central bank doesn’t have to, at least occasionally, jump interest rates by 62% overnight? Either way, should you have made the (extremely curious) decision to go long on the ruble in 2014, your investment’s off about 60% and your portfolio’s probably as cold as the Siberian winter right about now.
Guggenheim Solar ETF (TAN)
Okay, so this is not really one of the WORST investments you could have made in 2014, it just feels that way at times – particularly if you’re me. I shifted a hefty portion of my savings into this security this spring and, since then, it’s been a pretty rough go of it.
On the year, the ETF’s only off about 3%. If you track from its high of just over $50 a share in early March, it’s more like 30%, though. And if you’re like me and got in at $41.80, you’re looking at a loss of about 20%. Not good. Part of that can be attributed to a natural pullback after gaining more than 125% in 2013. The aforementioned crash in crude oil prices has also impacted solar stocks, which is particularly frustrating when you consider that there isn’t really any connection between the two.
Solar power is used for generating electricity and virtually no one is burning oil to generate electricity anymore, let alone installing any new generating capacity that uses oil. If anything, there’s at least a chance that severe price pressures will force America’s shale producers to scale back production, something that could boost natural gas prices and subsequently improve solar’s cost-benefit in the short term. Of course, if the perception is that the two are connected, the stock’s going to fall anyway, whether it makes any sense or not.
Oh well. It’s as the great and/or insanely and dangerously misguided (depending on who you ask) John Maynard Keynes said, “markets can remain irrational longer than you and I can remain solvent.” Personally, I’m waiting it out. I still think solar stocks are going to bounce back in a big way. Or at least they had better if I’m ever going to retire.
Au Revoir 2014…
If you’re one of the unlucky sods who went long on any of these seven investments, well, you’re probably reading this in a haze of scotch and incredible sadness. Don’t worry, though, the year’s just about over and 2015 could bring a lot of new opportunities to make that money back. As for me, I can only hope that Annie is right: The sun will come out tomorrow.