Lonrho Plc - Buy/Sell?

Lonrho Plc is a FTSE250 company that I have held shares in for a few years.This article is an honest analysis of the share and outlines my logic for the future.

 Lonrho Plc - Original Sin

For me Lonrho Plc has been a story of investment blunders. A couple of months ago I berated myself in a post for purchasing shares in Lonrho based on a tip from a friend. Of course this is and always will be a mistake and I would strongly recommend that nobody ever buys shares for this reason.

My second failing was to hold onto the shares knowing my original failing. The question is: will I continue to make this mistake? Should I sell and crystalize my loses - about 20% to date?

My original purchase of the shares occurred early in my "investing life", about two years ago. I was young and naïve, or at least younger and more naïve than I am now! I thought investing was all about making a quick buck. I bought the shares at 11.13 pence with the intention of selling when the price rose to 14 pence. Since that time, little has happened in terms of the share price. I probably should have sold as soon as I realised that my reasons for investment were based on shaky ground. A few weeks ago I came to my senses and decided once and for all to make a decision on Lonrho Plc. I dug into financial statements and news on the company since 2007 and reached some conclusions.

Lonrho Plc - A lucky mistake?

Lonrho is a company with a rich 100 year history that invests primarily in hotels and infrastructure in Africa. It has made loses for several years and has only recently started to generate a small profit. It has not issued a dividend in (at least from what I can see) the last 10 years. On the plus side the management seem well experience with knowledge of the market and Africa. Their revenues, profits and assets have growth every year over the last five years. After the progression of the likes of China and South Korea over the last 3 decades investors may looks for new areas of growth. This may well come from Africa with its large population and plentiful natural resources.

You probably think that I am trying to convince myself that my original investment was a good idea. However I would argue that I have spent a great deal of time, effort and thought analysing this share. I have under 2% of my wealth currently tied up in Lonrho and am sitting on a relatively large amount of cash at the moment. As a result I am inclined to continue to take a punt on this investment. If it were the case that I was short on cash and there was a clearly superior opportunity out there then I may have sold the shares in the last week or two. For now I am once again setting them aside for the time being. If this investment is ever going to pay off it is definitely a long game and if the company continues along the same path it could be a major player in a newly emerging market.

Readers, what do you think about this decision? Is my logic flawed? Am I guilty of making the same mistake twice?
Let me know what you think by posting in the comments box below. All thoughts welcomed however controversial (just as long as it's not abusive or spam!)

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