How did your portfolio do in 2022? From my experience, it seems many investors struggled throughout the year. Much of this underperformance likely stems from investors owning many of the up-and-coming stocks that crushed in 2021. But even those that tried to hide out in the mega caps didn’t fare much better with Meta falling 70%, Amazon falling 50% and even the illustrious Apple falling more than 25%.
If you somehow manage to outperform in 2022 you likely held a few big losers… Much like myself. That is why I would like to pull back the curtain a bit and talk about something that not many in the investing space like to discuss. These are my biggest losers, the companies, and investments that dragged my portfolio down the most, in 2022.
EPOL (-25%), Don’t Buy Because It’s Cheap
My 3rd worst performing position in 2022 just so happened to be my smallest as well. Occupying just 1% of my portfolio EPOL taught me a pretty important lesson.
Buying Stocks/ETFs because they are “cheap” or own “cheap” companies on a Cash Flow/EPS basis is a bad idea. I didn’t research this position and bought it purely because it was the “cheapest” emerging market country on a CAPE Ratio basis. Because I didn’t understand anything going in I can only guess as to the reason why it went down so much in 2022.
It seems to be a casualty of the war in Ukraine. Starting on February 24th the ETF fell 20% in just 1 week. Over the next year, the ETF would continue to drop all the way to where it would bottom at a 50% discount to its price at the beginning of the year. Despite this, since its bottom in October, the ETF has risen over 50% to reclaim some of investors’ lost money.
To further add to the enigma of my decision to buy this ETF is the fact that I own FRDM 0.00%↑, an ETF that allocates over 10% of its portfolio to the same companies in EPOL. An all-around wrong decision that I eventually sold out of to move the money elsewhere.
Intel (-35%), Cyclicality Hurts A lot
The tragedy that is owning Intel has carried well in 2023 with the company continuing to see big headwinds from every direction. In 2022 revenue contracted by over 20% and earnings collapsed even further. In total, the company’s market cap halved in dramatic fashion. Luckily I managed to miss some of that having only suffered a loss of 35%.
This huge loss in market cap is driven mostly by the massive slowdown in the overall chip market. While many were quick to call Intel a company in secular decline it seems that its competition (mainly AMD) is struggling in the same areas. The pain has gotten so bad Intel recently announced a 67% reduction in their dividend.
This dividend cut caused a lot of investors to rethink their positions. Personally, I figured it was coming, with Intel forecasting negative free cash flow this year I thought they would get rid of it altogether. Instead, Intel cut their payout massively and can instead use that cash to further their turnaround.
To me, this move indicates management is committed to this long-term goal of restoring the company’s dominance in the chip market and that is why I will continue to hold this position, even if I probably won’t be adding to it.
Corsair (-40%), IPOs aren’t always great
Corsair rounds out the list as my biggest loser in 2022. As for the reason behind Corsair’s collapsing stock price, it’s pretty apparent. Sales suffered massively coming out of the stimulus-fueled gaming bonanza that was 2020 and 2021.
It is a rather painful graph to look at. Virtually every single metric Corsair reports a decline. But they, like many other companies, have tried to stick to the more optimistic 2019 comparisons. Unfortunately, this strategy was not enough to save the stock price from falling 40% in 2022.
The trap Corsair fell into was that of comparisons. For whatever reason management believed the surging sales in 2020 and 2021 would be the new normal for the company. Turns out, to no one’s surprise, this is not the case. As the company started reporting quarterly earnings it became apparent the gaming craze had slowed.
The company was also caught up in the meme stock craze of the last few years soaring with some of the more familiar names like GME 0.00%↑ and BBBY 0.00%↑. It also suffered the same fate of the hype fading and the stock falling.
A Retrospective
2022 was a weird year. I had some of my largest positions fall dramatically and still managed to handily beat the market. I would attribute much of this to luck and not my personal ability to pick the best companies, at least not yet anyway.
Of the three positions mentioned I still own Intel and Corsair. I ultimately sold EPOL for some other reasons. I intend to continue holding them too as I believe they are valuable companies going through a rough patch right now.
I look forward to making another post like this in a year’s time to see how the rest of 2023 unfolds. Currently, there are banks failing and the market seems relatively unfazed by this catastrophe, which I find a little odd.