When is a loss a loss?

A rhetorical question. When is a loss a loss or a profit a profit? Answer: Not until you take it. Sorry if that sounds patronising but bear with me.

In 2002, I invested in a company called Ashtead, I was still a relative novice but I noticed that the company had considerable assets and that the market cap. was around or below the value of it's assets. What I hadn't quite grasped (through naivety) was the size of it's debt.

I originally bought shares for 30p. However, the company started to look like it was in trouble and about to break it's banking covenants. I watched as the price sank from my 30p purchase price to an intra-day low of around 1.5p.

However, the company survived chiefly because of it's assets and as the share price and confidence began to return, I bought again at 15p. The price rose and I felt so proud of myself having survived the experience that when my holding turned a small profit I sold my shares. Hurray.

Ashtead's share price today is £11.27. Even my original 30p purchase would have 37.5 bagged. My 15p purchase would have 75 bagged. Oops.

Make what you will of my anecdote, but it was an invaluable and chastening lesson for me. Catch a few of these companies in your investing lifetime and the rest of your portfolio becomes almost immaterial.