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I won’t spend much time explaining why 2022 has been an odd year for investors to navigate. By now, I think we’re all aware of the issues of the year, even if I just mention one or two words (inflation, Russia).
I’ve tried my best to be smart in my moves to react and pre-empt the moves in the stock market. Sometimes I got it right, sometimes I didn’t. Here’s my biggest mistake of the year.
The star performer
Back in Q1, I thought that Glencore (LSE:GLEN) could do well. The global commodity powerhouse was already performing exceptionally well going into the new year, with the share price at the highest levels in a decade.
With the commencing of the war in Ukraine, oil and gas prices spiked. Volatility in other commodities (such as copper) also rose, as demand for electric vehicles continued. Back in August, results showed that Glencore’s interim core profit rose by $10.3bn from the previous period.
Over the last quarter, the share price hasn’t moved that much. But thanks to the very strong first half of the year, the stock is up 46% over the past 12 months. This makes it one of the best performing stocks in the entire FTSE 100.
My mistake with Glencore
At the start of the year, I decided against investing in Glencore as I thought the stock was too expensive. I’m much more of a fan of buying a stock when it’s falling, rather than the other way around. I think there’s sometimes a danger of jumping on the bandwagon and buying a stock that has already seen such a strong move higher. Being the last one in on a big move usually doesn’t end well.
Yet this fear of buying at the top ultimately cost me a potential profit of 46% this year. With hindsight, I should have noted that the ramifications that sanctions on Russia would have on oil and gas prices.
Back in May, I also noted the net debt to adjusted EBITDA (a profit measurement) ratio for 2020 was between one and 1.5x. This debt level was good. So even with interest rates rising, it wouldn’t be a huge concern for the business (or investors) for the rest of the year. But, again, I didn’t think interest rates were going to be as high as they are now back in the spring.
A lesson from the stock market
Should I have bought Glencore stock in January? Yes. It’ll go down as my biggest mistake of the year. However, I’m not kicking myself too much. Despite missing out on this profit, there have been other stocks that I avoided in January that have plummeted in value this year.
Missing out on profit is one thing, avoiding a loss is another. So as we go to 2023, I do want to trust my gut more. But I also need to feel 100% comfortable in my decision to avoid getting caught up in just the fear-of-missing-out (FOMO)!
