Another red day for the markets with the S&P 500 $SPX500 down by over 3% despite better than expected jobs data with unemployment rates at a record low of 3.5%. JPMorgan Chase $JPM is down by 7% with as the CEO Jamie Dimon had an emergency heart surgery yesterday. In our portfolio, TLT is up by 5%. Our gold miner $$POLY.L up by 1%. All our other stocks are down.
Why I Sold My Diageo Stocks
A few months ago, Diageo $DGE.L was one of the largest positions in my portfolio. I said that it was a recession-proof business and it is the best Brexit stock. But I recently sold all my shares.
I first bought Diageo in 2016, even before the Brexit referendum. Diageo is a British exporter and if the British Pound weakens $GBPUSD , the stock price would go up. This is exactly what happened. The second reason why I bought Diageo was because I was a newbie at the time. I was looking at only big companies with a moat and with a recession-proof business. Diageo matched all these requirements. In 2017 and 2018, I didn't bother to add more shares of Diageo even how high the price was going.
Last year, I bought more Diageo shares and that was a mistake. I bought near the peak. The second mistake that I made was buying too much too quick. The price was going up and I didn't want to lose the opportunity to invest. A few weeks later, Diageo peaked and the stock price has been falling since then.
I've decided to sell everything. Even if Diageo stock will eventually recover, it will remain a slow growing company and this is not the type of stock I want to have in my portfolio anymore. Today, I am a better investor than I was 4 years ago. At the time, I was looking for smaller returns but now I'm looking for bigger returns (with less risk). Diageo is not a company that fits my investment criteria anymore.
Diageo is a recession-proof business but not a recession-proof stock. In 2008-2009, the stock price of Diageo fell by more than 50% even if the revenues were increasing. People are always going to drink alcohol, recession or not, but they are not always going to buy stocks. When there is a selloff, they will just call their broker and tell them to sell everything. Diageo is on the FTSE 100 $UK100 and in case of a recession, people holding ETFs of this index will sell the ETF and consequently this will trigger a selloff in the underlying assets as well.
Every investor makes mistakes. Ray Dalio made a big mistake in 1982 and he had to ask his father for $4000 as a loan to pay rent and other bills. Warren Buffett made a mistake with Kraft Heinz. You should never think that you're a perfect investor who will never make a mistake. This is not the last mistake that I will make but certainly now, I'm making less and less mistakes. The best thing to do is to admit it when you make a mistake and think what you can do to make things better.
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