
Airlines
Airlines are crazy businesses. Firstly you have to commit to financing equipment that is mind-blowingly expensive and requires hugely costly maintenance in order to avoid things falling out of the sky and the company covered in public opprobrium. The equipment is frequently run by bolshy staff (eg: BA cabin crew, Virgin pilots), you have no control over the vagaries of the people who own the landing sites and, just when you think things are running smoothly, up pop volcanoes, terrorists, a few inches of snow at Heathrow, absurdly overpriced fuel, and civil wars. I hear you say, “What about Ryanair?” I agree it has successfully revolutionised air travel. But if you check out its share price graph, you will see the shares have more or less flatlined for the past ten years (even though it is probably the best in the business!). Meanwhile, the latest stock market hopeful, Flybe, has plunged from 295p when it was listed last December to approximately 195p now. Avoid.Banks
Textile manufacturers
About about 20 years ago, I had a sizeable investment in SR Gent, then one of the biggest suppliers of ladies’ apparel to M&S. In those days, M&S made a big thing about buying British so, when SR Gent announced it was moving a large part of its manufacturing to Sri Lanka, there was quite a kerfuffle. Accordingly, I very quickly got to understand the first rule of textiles: no matter where you’re currently manufacturing, there is always someone who can do the same cheaper elsewhere. Thus the whole thing is a global race to the bottom (as it were!). No doubt, the present holder of the textile crown, China, is beginning to experience this right now. The rag trade can seduce: don’t be lured in. Many well-known investors like to tell you about their successes. Candidly, they would admit that much of their good fortune is down to avoiding the major duds. You know where they are! Share this story