Shares in the current climate

Tayus

People,

I don't claim to be an expert in this field, in fact I have minimal experience/knowledge on share prices however, is it not reasonable to believe that eventually share prices that have taken a big hit over the last 12 months will recover? (maybe not to their previous value).

I ask this because I have been monitoring some shares over the last couple of months, in particular Royal bank of Scotland - their price is currently at 34.7p per share and they have been 357p in the past.

Regardless of comments made on this thread I will be investing in some of these next week and intend to keep hold of them for the long run.

opinions4u

I don't claim to be an expert in this field, in fact I have minimal experience/knowledge on share prices however, is it not reasonable to believe that eventually share prices that have taken a big hit over the last 12 months will recover? (maybe not to their previous value).

It's a reasonable thought. No guarantees though.

I ask this because I have been monitoring some shares over the last couple of months, in particular Royal bank of Scotland - their price is currently at 34.7p per share and they have been 357p in the past.

Alan Sugar bought Woolworths shares for 3.4p. I think he regrets it now. I sold Woolworths shares for 52p a few years ago.

Regardless of comments made on this thread I will be investing in some of these next week and intend to keep hold of them for the long run.

You will probably make a decent profit. Problem is, they are very high risk. Many of the banks are teetering on the brink of nationalisation becuase their losses are rapidly eroding their capital.

The major shareholder in RBS is HM Government.

A bit more bad news for the bank and they may have to take 100% control. This could potentially make any newly acquired holding for you worthless.

Your plan is extremely high risk.

Myrmidon_J

Tayus wrote: »

... is it not reasonable to believe that eventually share prices that have taken a big hit over the last 12 months will recover?

In the aggregate: almost certainly. However, they may yet fall further and it may take an awfully long time for shares to return to their highest levels.

Individually: maybe, maybe not.

'opinions4u' made a good point - if you'd purchased Woolworths shares for tuppence, you'd have lost tuppence.

Shares in Anglo Irish were just 22 (Euro) cents the day before the bank was nationalised - down over 95% on their all-time high - but I think shareholders will be lucky to receive anything for their paper.

If you want exposure to 'recovery stocks', you can invest in a collective fund that will reduce risk through diversification.

I ask this because I have been monitoring some shares over the last couple of months, in particular Royal bank of Scotland - their price is currently at 34.7p per share and they have been 357p in the past.

RBS shares are trading so cheaply because the market understands that shareholders won't be paid a dividend for ages and ages! (The terms of the government bailout severely restrict the options...)

I wish you luck, but 'opinions4u' is right: your plan is extremely high risk.

ManAtHome

opinions4u wrote: »

Alan Sugar bought Woolworths shares for 3.4p. I think he regrets it now.

Apparently S'Ralan was saved by the cod-rustlers... http://www.independent.co.uk/news/business/news/finger-points-at-icelandic-crisis-as-sugars-woolworths-share-swoop-is-scuppered-965579.html (sometimes luck is better than judgement).

tradetime

Tayus wrote: »

People,

I don't claim to be an expert in this field, in fact I have minimal experience/knowledge on share prices however, is it not reasonable to believe that eventually share prices that have taken a big hit over the last 12 months will recover? (maybe not to their previous value).

That would rather depend on why they lost their value, some companies will simply not be around, so I would say no, as a generalization it isn't a reasonable assumption. On the other hand if you can identify the companies that most likely will survive, then you can start considering how much they may recover.

Tayus wrote: »

I ask this because I have been monitoring some shares over the last couple of months, in particular Royal bank of Scotland - their price is currently at 34.7p per share and they have been 357p in the past.

Well the first thing you can say without doubt about the upper price is that banks were overvalued, they had far too much leverage and the value of their assets were significantly below what they were valued at, and you can say, that even if they survive the current crisis it will be a long time before they can generate anywhere near the earnings of the past few years. You probably couldn't have picked a more risky sector to look at.

Tayus wrote: »

Regardless of comments made on this thread I will be investing in some of these next week and intend to keep hold of them for the long run.

That's fair enough, as long as you understand the risks. Interestingly of the remaining big banks, RBS is the one I'd least expect to survive in its current form.

opinions4u

A useful read from an article I stumbled across in Google.

I think this was dated in the middle of 2007 before anybody in the UK had anticipated anything like the credit crunch. I would guess its related to a press release aimed at getting investors to part with their money too, so read in that context.

The key for me is the time taken for markets to recover.

http://firstrung.co.uk/articles.asp?pageid=NEWS&articlekey=7960

You do need to overlay current circumstances to this thinking too. Restricted bank lending will delay and reduce the size of any recovery.

I was actually trying to find a list of FTSE100 companies then and compare it to now. I'd guess less than a third remain. But that is a guess.

tradetime

opinions4u wrote: »

I was actually trying to find a list of FTSE100 companies then and compare it to now. I'd guess less than a third remain. But that is a guess.

Here you go.
http://www.bloomberg.com/markets/stocks/movers_index_ukx.html

Stavros_3

A mate who does a lot with S & S advised me to buy RBS when they dropped to £2.80p. Spoke to my IFA who said there was far worse to come with that bank, Oh how right was he and thank god I listened to my IFA and not my mate who suggested they were a good buy.

steveteach

Shares have been badly hit recently, banks more so than most, but shares should be seen as a medium (5 years or so) to long term (10 years or more) investment. Only invest if you don't need to get the money out in a hurry and could stand to lose the whole investment. Other than that only look to make small but quick profits (or losses) by buying and selling over a short period.

They could be part of a diverse portfolio which could include ISAs, regular saving accounts, pensions, property (again long term investments) and whatever else you wish to invest in. Just don't keep all your eggs (money) in one basket.

Andrew64

I can't think of a bigger gamble. See this article, for example:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4280174/Lloyds-resists-Government-share-offer.html

"It comes as the banking industry faces a new phase of the financial crisis. Ministers have drawn up contingency plans to fully nationalise Royal Bank of Scotland (RBS), and last night that possibility looked increasingly likely. Redeeming its preference shares in RBS would take the taxpayer's stake to about 70pc, and RBS is unlikely to resist such a move."

At best your shareholding will be diluted. At worst you would lose everything.

giruzz

http://www.google.com/hostednews/ukpress/article/ALeqM5h-mSb2llwUSV6TBWKR05Yx_JCgMA


RBS 'set to be nationalised'

25 minutes ago

The only thing I would do with RBS is to short sell...

giruzz