Home Sports Here’s what can happen when you buy ASX shares in loss-making companies

Here’s what can happen when you buy ASX shares in loss-making companies


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Investors who buy shares in loss-making ASX companies may find themselves on the hunt for the next millionaire, experts say.

Research platform MST Marquee has reportedly found that strictly investing in loss-making stocks can be a surefire way to destroy wealth.

Read on to find out how a portfolio full of losers might have performed since the turn of the century.

Why do Aussies love ASX loser stocks?

A study conducted by MST Marquee, as cited by the Australian Financial Reviewit was found that strictly investing only in underperforming ASX stocks could have resulted in a shareholder losing 99.7% of their invested capital since 2000.

A research company is said to have created a model portfolio worth $100 at the turn of the century.

The portfolio was then rebalanced annually preliminary reportingto remove companies that have since posted their first earnings.

As of 2011, the original $100 investment had dwindled to just $4.10. And now it costs only 24 cents.

That’s what an average compounded loss of 23% each year will produce, folks.

But not everything was bad.

MST Marquee senior analyst Hassan Tewfiq reportedly said the portfolio grew by 37% in 2009. It was also said to have increased by 60% from March 2020 to October 2021.

Interestingly, the risk of long-term losses appears not to have been enough to deter investors from buying loss-making ASX stocks.

Many market watchers seem to be looking for the “next big thing”. S&P/ASX 300 Index (ASX: XKO) would seem to reflect such ambitions. fifty ASX 300 stocks are reportedly showing balance sheets in the red now.

Tewfik said, please AFR:

Despite a dismal track record, investors continue to buy these unprofitable companies… [they could] hope that some of these birds will grow wings and begin to soar like an eagle.

While our Birds Without Wings portfolio will buy these stocks, we advise other investors to proceed with caution.

However, many diamonds are likely to be found in the rough.

indeed Pilbara Minerals Ltd (ASX: please) only posted its first profit the last month.

Shares in the ASX lithium favorite have risen tenfold in the past five years, rising from 49c in September 2017 to $4.94 in Wednesday’s session.


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