After 30 years of investing I have made my fair share of mistakes, but I have also had some great investments. A good ASX share in my view can be 1 of 2 things. A solid value investment, where I have been able to find an undervalued good company. Alternatively, I also actively look for great growth opportunities. That is, companies that I think are likely to increase my investment by 5 to 10 times over the medium term.
Here are 3 ASX shares I have owned – 2 that I would willingly buy again if the sale price was right, and 1 of my more recent bad choices.
ASX shares in mining
I generally choose mining shares today only if I think they are likely to grow considerably in the near- to mid-term. Nonetheless, I used to focus almost exclusively on this sector. I started to buy Fortescue Metals Group Limited (ASX: FMG) shares at about $2.40. I knew Andrew Forrest from Anaconda Nickel, I knew the iron ore mining industry, and I thought the two things would go well together. I didn’t anticipate the scale of his success though.
Even at around Thursday’s closing price of $17.89 per share, I would buy FMG shares again and may do soon. The company is now very disciplined, very innovative, and has a solid future in front of it. At Thursday’s closing price it is trading at a price-to-earnings ratio of 8.49, which I consider low, and pays a trailing 12-month yield of 9.84%.
Healthcare sector
In 2001, I purchased shares in Cochlear Limited (ASX: COH) for about $39 (from memory), and sold out later at approximately $130 per share. This was a wonderful investing experience and I earned a lot in share price growth and dividends. I bought it because of the pedigree of the science, the management style, and because there was clearly a large addressable market. I remain fascinated with innovative healthcare technology shares up to this day.
Right now, for me, Cochlear is too expensive for an ASX share. However, if the price was right I think I would buy the company again.
Regrets, I’ve had a few…
Although I have regretted buying several ASX shares, my biggest mistake was Avita Therapeutics Inc (ASX: AVH), but not because it is a bad company. Today the company is enjoying a second wind and I have been watching it closely.
I regret it because of how I managed the situation. Avita was started by Dr. Fiona Wood, who invented spray-on skin to treat burns victims. The treatment was used to help victims of the 2002 Bali bombings. I purchased these shares for around $63, then I watched as they went down to $31, then to $23, and finally to $5.30.
There were many reasons why it failed then. Reasons that are unlikely to occur again. However, I regret not selling them sooner. I held them and held them thinking that they would come back again. Had I acted sooner I could have reinvested what I had left and started to get higher returns.
Foolish takeaway
I continue to apply the lessons I learned from these 3 investments when I buy ASX shares today. First, management is the most important thing. A great manager in an average company beats a bad manager in a great company. I invested in Fortescue partly because I understood iron ore mining, but mainly because I had seen Andrew Forrest in action before.
Second, make sure you understand the addressable market and the company’s competitive advantage. Cochlear was clearly taking proven technology into a wide open market. The IP it held was enough to see it gain a clear leadership position as the first mover.
Third, know when to give up. Every day I spent waiting for Avita to turn around was another day I wasn’t getting a positive return on what was left of my investment.
Good luck!
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More reading
- 3 outstanding ASX shares to buy and hold for decades
- Why the Rio Tinto share price is outperforming its peers
- 3 reasons Fortescue (ASX:FMG) shares will make you richer
- ASX 200 drops over 2%, tech and oil fall
- 3 ASX shares that are trading at bargain prices
Daryl Mather owns shares of Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited and Cochlear Ltd. The Motley Fool Australia has recommended Avita Medical Limited and Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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