Oh, Suncorp. How could I sell you now?

PORTFOLIO POINT: Investing should never be done emotionally, but some stocks have a way of building investor hopes.
Things might be getting better at Suncorp. No kidding. You’re thinking it might have problems with a global banking crisis, Queensland property developers hitting the wall (Imagine that!) and a major storm ripping through Brisbane last week.

But the fact of the matter is that chief executive John Mulcahy is suddenly talking of higher-than-expected banking profits next year, and that surprisingly optimistic forecast presents a problem for me because I was just about to sell the stock.

I sometimes find it hard to sell a share but at the end of the day I'm a rational investor – you won't find me making emotional decisions about my share portfolio.

I bought Suncorp in November 2006 for $22.10. That might sound on the high side but the price/earnings multiple at the time was about 12, against a market average of about 15.

Suncorp had it all: exposure to Brisbane “the city of the future”, a free ride with the mining industry and, of course, (as everyone said at the time) it was perfectly placed to enjoy a “wave of money” flowing into managed funds.

Soon after I invested the price softened a little. In fact, it softened a little too much for my liking and I was thinking of selling it in April 2007 when the bank announced a two for 15 rights issue at $15.50. I paid up. My plan was to “average down”.

So with the “averaging down” policy firmly in place I set sail afresh with Captain Mulcahy and the Suncorp crew.

But it wasn't long before mutiny struck. In October 2007, Michael Kay the former head of AAMI, jumped ship to be followed by a handful of senior executives.

I worried about this disintegration of the management team and thought about selling. But then Mulcahy himself had been a “top line” departure from David Murray’s Commonwealth Bank where senior executives fell like skittles: Michael Ullmer to NAB, Russell Scrimshaw to Fortescue. So really there was no good reason to sell.

At the start of 2008 things looked better. The stock price started a climb that took it from $12 to $16 by June. No need to sell now, I told myself, and who wants to take a tax loss before June 30 anyway?

Don’t ask me how, but before I knew what was going on the price was back down at $12 and I had lost half my investment. Now the issue before me was that if I sold Suncorp I had to find something else that could really charge ahead and recover those losses.

I had a few stocks in mind and guess what happened? Yes, the world was engulfed in a credit crisis but “things were looking up for Suncorp” because it became a takeover target: there was going to be a fight for this bank. Only a fool would sell with “an auction” forming.

But ANZ was the only bidder with a low-ball offer and the auction fizzled.

Still, auctions often fail and the next thing you know there’s talk the government is going to give a guarantee on all banks; it meant Suncorp would be as good in the eyes of investors as any other bank. Well, I had to see how this would play out '¦ it played out pretty close to my expectations except the share price part of things. That did not really play out at all: Suncorp fell below $10.

It was time to reassess.

Oh God! This is hell, this is the worse stock loss I have ever had in my life. I’m down two-thirds now. I’m immobilised with grief. I’m in denial!!

Ignore that last sentence. It was a momentary lapse of reason. That’s not me. I’m a rational investor; you won’t find me making an emotional decision about my shares.

You might say, however, I am finding it very hard to make a decision about Suncorp.

I don’t need to make a decision now, anyway, because the stock lifted 7% on Tuesday – better than the market record one-day gain. I mean why would I want to sell it now?