Newsletter October
2004
This is the first edition of the
newsletter and is intended as a sideways look at the club and what is going on
between the lines. The subjects might be club members, specific stocks or a
take on economic trends or perhaps any subject which takes the authors fancy. Just to
introduce our decision to put pen to paper I will admit to being a long term
shareholder who joined the club about three years ago. Recently, Mourad one of
the founder members suggested a newsletter which could help to generate
interest amongst members or the general public, if we choose to allow it.
Our October meeting was held on
Thursday 21st and as usual
was a mix of portfolio reviewing and discussion of possible share targets. We
did indeed make some proposals about conditional purchases. Specifically Retail Decisions, housebuilders and Character
Group. The club has recently lost a member who resigned for personal
reasons. Alan had been a respected long serving member. Hopefully it will not
be the last we see of him, however our resources for investment are temporarily
reduced.
Currently our winners are Synergy Healthcare, with a good steady
capital appreciation and NHP which
has moved ahead nicely over the last few months. To a lesser extent we are
showing a gain on Character but
currently ponder whether recent upward movement in the share price is a good
sign and a buy signal or not. Certainly the Character chart looks as if the bottom may be in the past. With Synergy it may be an ‘add’ candidate
but with NHP we await developments
which we hope will be increasingly profitable.
Finally we have called time on M&S. We were left with one orphan
share and sent it to charity recently. Hooray. No matter what is in store for M&S as a profitable proposition it
was time we were out of it. One share is little more than a nuisance unless it
is one of Berkshire Hathaway’s at
many thousands of dollars each.
Our losers have recently caused us
much aggravation. Members debate whether we have paid too much or set stop
losses too tight. Whatever the cause, possibly a bit of both, we have endured
some relatively hefty losses by becoming forced sellers. Hopefully we can
refine our trading to prevent similar problems in future.
Two or three shares like Air Partner and Mitie are hanging in there and we believe that they are candidates
for capital appreciation going forward.
Our club has a strict policy on
purchases. We must produce a toolkit. This stops impulse buys and keeps us away
from forays into non-profitable firms. A pity it does not stop losses when
either the chosen share falls or the market as a whole moves against us.
We have several prospects lined up
but we definitely favour solid earners like Taylor Woodrow and Persimmon
amongst housebuilders. This sector
is moving downwards as sentiment dictates caution with interest rates moving upwards. As they move into the buying zone we
may well decide to take the plunge. Watch this space.
Another share we regularly cast
the rule over is Patientline. We were
previously holders and now the share is strengthening it may well turn into a
target of ours since the business model seems quite compelling. More about
prospects in the frame next month.
Centrica was mooted by a member and it has been tipped twice
recently by Sunday Telegraph. Confusion seems to have occurred due to the share
consolidation of ten shares for nine. This exercise does not lessen value as
some shareholders seem to fear. Therefore the extraordinary payout announced by
the company and stemming from the sale of RAC
timed to coincide with the regular dividend will pay profits to shareholders
with no diminution from the consolidation. Weakness in the share price at
present seems to be due to worries in the gas market with demand and traded
price being so volatile and threatening margins. Unfortunately this explanation
of the facts has come too late since the last date of purchase to qualify for
the payouts was 23 /10.
The FTSE 100 and S&P
500 seem to have run out of steam at the moment after a good run in early
October. Which way will the markets
move next.? Is the oil price holding the key?
Perhaps the Presidential election will push markets one way only for the elections in Iraq to push things in reverse. Somehow I believe it may take a few months before markets regain their poise as volatility will be the order of the day. The markets are looking for certainty and it is not apparent at the moment.
Martin Longman