By Alec Hogg
In the investing world, we all have those “shoulda, coulda, woulda” moments, like kicking ourselves for selling too soon. But Warren Buffett reminds us that it’s far better than sticking around when a scandal emerges. Take it from the Oracle himself: one issue often means there’s more trouble brewing.
Case in point: Metro Bank. It’s the first new High Street bank in the UK in over a hundred years. We caught wind of it through Capitec’s Gerrie Fourie and even chose them as our go-to bank for BizNews UK when we launched there in 2016. Initially, things looked promising: great service, solid balance sheet, and a ringing endorsement from Fourie. We were so convinced that we added it to our BizNews model portfolio at £33 a share back in November 2016.
___STEADY_PAYWALL___However, around two years in, the first red flag popped up. Vernon Hill, Metro Bank’s billionaire founder, had given his wife a lucrative interior decorating contract for the bank. It felt eerily similar to the Barry Swart scandal at FNB. So we decided to heed Buffett’s indirect advice and cut our losses, selling at £32 a share.
Fast-forward to today, and Metro Bank is spiraling. The UK regulators have called them out for some sketchy accounting moves, resulting in Hill and his CEO being shown the door. And just last week, new owner Jaime Gilinsky’s last-ditch effort to save the bank fell flat. They had to scramble for new capital just to stay afloat. The stock price? It plummeted to 35p a share.
Good news is, a new capital infusion has been agreed upon, nudging the shares back up to 53p. But let’s not sugarcoat it—the damage has been monumental. If we hadn’t pulled out in 2018, our original £15,500 investment in the BizNews model portfolio would be worth a mere £235 today. That’s a jaw-dropping 98.5% loss.
So, lesson learned, right? When in doubt, listen to Buffett.
Sterkte.
Alec
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