Trading statements

It's been quite a week for trading statements on the London stock market - many of them, and quite a number signalling profits exceeding market expectations: Colefax (wallpapers), Fletcher King (real estate, surveying), and Tribal spring to mind. Difficult to jump on board all three, but I got on the Tribal bus, despite it rising by over 10% as soon as the news hit the market. Also interesting to see that directors increased their holdings in Victoria (VCP) ... may have to buy more of those.

A down week for the FTSE100 (minus 0.84%), and one of those weeks when I beat the market by best part of 2%. Royal Bank of Scotland (RBS) has been marked down on possibility of hostile bid for ABN Amro (silly, surely, to offer shares when PE of RBS is much lower than target company).

.. exceeding market expectations

One feature I have found to be an excellent precursor to substantial rises in the price of a stock is a stock market announcement that profits are likely to exceed market expectations. The stock usually rises immediatedly, sometimes then falling back, sometimes not, before, over a longer period, rising considerably. The effect seems to be stronger when the "exceed" is preceded by words such as significantly or comfortably. It is also helped if the company is on a lowish rating, taking the debt/cash position into account. This morning Victoria Carpets (VCP) made such an announcement (see here) and I have bought some shares, despite having to pay more than 10% above yesterday's closing price.

Brown: A Fool with the UK's Gold

Gordon Brown isn't just an average fat bloke. No, he's been Chancellor of the Exchequer (that is, the UK's Finance Minister) for 10 years. Unfortunately, he's useless at finance and economics. As Mark Twain would have said: ".. it's not that he doesn't know any economics, it's just that everything he does know is wrong". Faced with the problem of managing the nation's gold reserves, he and his advisers (bad at economics) ignored the Bank of England's (they're good at economics). See here:

GORDON BROWN is to face questions in parliament after revelations that he disregarded advice from the Bank of England before he sold off more than half the country’s gold reserves at the bottom of the market.

Insiders involved in the decision have broken ranks after an 18-month battle in which the Treasury has blocked attempts by The Sunday Times to make public the official advice received by Brown before he sold the gold.

They have revealed that Bank of England officials had serious misgivings over the chancellor’s determination to sell 400 tons of bullion in a series of auctions between 1999 and 2002, when the price was at a 20-year low. Since then the price has almost trebled, meaning the decision cost the taxpayer an estimated £2 billion.

Anticipating trouble: dangerous phrases

An interesting post here on dangerous phrases in directors' announcements, which are often a warning sign that problems are being hidden from the stock market. The phrases include "international", "well positioned", and "firm/solid platform/foundation":

A firm/solid platform/foundation:
This roughly translates as rock bottom - what could be a more solid platform? Usually, by the time they resort to this phrase, you can take it as a hope expressed in sheer desperation, along the lines of "It surely can't get any worse than this.. can it? Either way, we're ****ed if we know what to do next and are resorting to prayer.

When directors contact you - wanting to buy your shares!

Shareholders rarely get letters from directors containing a general offer to buy their shares at the current market price. What should they do, upon receiving such a letter? I add this item to the pool of shareholders' experiences.

In late 2004 the directors of E Wood (then known as Torday & Carlisle) sent me a letter offering to buy my shares direcrtly off me, thereby saving me any market dealing costs. The price was around 90p. My thoughts at the time? Now, why were the directors taking this unusual step with a share which had been through years of trouble and stagnation? Well, it's rarely true that directors (and just about never true in the case of anyone cold calling you) are offering you 'something for nothing'. But it's far more common that they're willing to go 100 to 0 (or even 150 to -50) on sharing potential gains. So, my reaction was to buy more: I more than doubled my holdings from 2115 to 5035 in January 2005. Result: on 22 March a recommended cash offer of 323p a share was announced.

Top Ten Holdings, 23 March 2007

Figures show percentage of portfolio. Top ten holdings accounted for just over 38% of portfolio.

Coffee Republic 6.05
Character Group 4.83
Highway Insurance 4.00
Renold 3.32
E Wood 3.22
Soco International 3.12
RC Group 2.89
BP 2.52
Fayrewood 2.47
Smaller Cos Dividend Trust 2.14

2007: a difficult, but good, first quarter

Quite a lot of profit disappointments and negative trading statements, and I spent the first few weeks underperforming the FTSEAllShare. And yet, I've had a good quarter: at 30 March my portfolio had made 7.0% capital gain compared to the FTSEAllShare's 1.96% and the FTSESmallCo's 2.76%. That's over £32,000 (nearly $60,000) ....* Quite a chunk of the gains are due to strong gains in Character Toys and Coffee Republic ... plus a takeover for E.Wood, one of my top-ten holdings, effectively brought me nearly an extra £5,000 before breakfast one March morning.

* There's none for that greedy bloated socialist Gordon Brown (and I've gifted quite a lot of it to relatives and some friends) ... and, given our stupid inheritance/death tax rate of 40%, I've got nearly half a £million to spend at 40% off!