"Do Your Own Research" - How?

gadgetmind

cashbackproblems wrote: »

same here, am down thousands on shares barc, aviva, sres, pmk. but funds are all holding up well!

I guess it depends on the particular fund and/or share. My far east investments are holding up well, whereas my European is in tatters. However, we need to see this as a chance to rebalance.

I'm actually in profit with Aviva but am not faring so well with Amlin. Overall, my direct share holdings are up 4.26% since the start of the year (and I've had over £1k in dividends), but this is only because I have injected a *lot* of fresh funds.

IronWolf

With regards to unforseen events, this is where the "margin of safety" comes into it, which is a concept thought of by Ben Graham. It means that you never buy a share for its true value, you only buy shares that are undervalued. This difference between price and value is your margin of safety. For example if you bought BP for below its value, then the impacts of an oilspill would effect your profits less as you already have a safety net.

The thing about margin of safety is it stops you goin into almost all the stocks on the exchange bar a few, and most of the time the ones selling below true value have just gone through a shock event, e.g. BP after the oil spill, insurers this year, some banks this year (gotta separate the good from the bad, if you can).


Don't worry about Amlin gadge, I'm still very optimistic If I didn't already have 20% of my portfolio in them I would have averaged down at around 280p, my average is 340p at the moment though, but i've had a dividend payment too since I bought. Just hoping the dividends aren't cut, which I highly doubt, their balance sheet is strong and insurance premiums should be rising over the next year given the horrific year of accidents

gadgetmind

IronWolf wrote: »

Don't worry about Amlin gadge, I'm still very optimistic If I didn't already have 20% of my portfolio in them I would have averaged down at around 280p, my average is 340p at the moment though

I've only got a few £k in Amlin, and bought exactly once at 324p. Fortunately, my timing was better with Aviva. I also go lucky with Diageo and BLT, Shell and Reed Elsevier, and have a good dividend stream to look forwards to.

My banking prefs have also perked up. LLPC lifted 20% yesterday, and a bit more today, but I'm still down 5%, which probably won't change until the divi block gets lifted.

Linton

IronWolf wrote: »

With regards to unforseen events, this is where the "margin of safety" comes into it, which is a concept thought of by Ben Graham. It means that you never buy a share for its true value, you only buy shares that are undervalued. This difference between price and value is your margin of safety. For example if you bought BP for below its value, then the impacts of an oilspill would effect your profits less as you already have a safety net.

The thing about margin of safety is it stops you goin into almost all the stocks on the exchange bar a few, and most of the time the ones selling below true value have just gone through a shock event, e.g. BP after the oil spill, insurers this year, some banks this year (gotta separate the good from the bad, if you can).


.......

How do you know?

gadgetmind

Linton wrote: »

How do you know?

Well, there's the kicker!

You can look at book value, div yield/cover, gearing, p/e ratios and price to book all you like, but everyone else is doing the same. I guess this is why I tend to look at underlying technology/IP to see if there is something outstanding in there.

For more generic companies, I need to see a screaming bargain, which is why I rarely buy such stock and only on the "sky is falling!" days.

I also put some trust in certain stock pickers, which is why I do hold some funds (Trojan, Ruffer, M&G Global Basics, First State Global Listed Infrastructure, and a smattering of others) and ITs such as RIT.

I am trying to get a handle on what I guess it's multiple conflicting strategies, but as with most other areas of my life, it seems to be working so far!

Meeper

Gadgetmind, I'd be interested to hear your opinion on Telecom Plus, TEP.L as a growth stock.

IronWolf

Linton wrote: »

How do you know?

Well that's the trick. You'll never know for sure how much something is worth, as value depends on future earnings and interest rates. As John Burr Williams said, investment value is the discounted value of all future cash flows to the owner, in the case of small investors this means dividends.

So you have to estimate future dividends, which is hard to do for just a few years, never mind 10 or 20 years!

Everyone will get a different answer, I usually estimate it as a range and rather than discounted cash flow models I just capitalise dividends and retained earnings based on what returns I think they'll get on them.

The most important thing to learn though is that you can't value every business, and dont try to. I only value businesses with historically "predictable" earnings (or dividends) and strong competitive advantages, so you can have some confidence in the future. But I cant value something like a media company, because I have no idea if they'll still be able to get contracts in 10 years and what their earnings will be.

gadgetmind

Meeper wrote: »

Gadgetmind, I'd be interested to hear your opinion on Telecom Plus, TEP.L as a growth stock.

Wow, that name is a blast from the past, but a quick google shows there have reinvented themselves somewhat.

It's not really the kind of thing I usually look at: not large enough and not enough divi cover to be an income stock, high p/e (but I hold a *lot* of shares with p/e ratios *much* higher!) so hard to describe as value, so we're left looking (as you say) at growth.

I guess it depends on whether you see value in the MLM business model, whether you think they can expand beyond the UK, what their "stickyness" is with customers, and how easy you think it would be for competitors to move in. I like their "lean and mean" approach but it does show that there isn't a particularly high barrier to entry.

If I held them now, I think I'd be patting myself on the back and profit taking, but the brokers clearly disagree. I'll maybe add them to my watch list out of curiosity.

Another share that's been on my watch list for a *long* time is Smith and Nephew. A big growth area due to demographics, valuable and well-protected technology, good international exposure, but sadly not (yet) generating the profits to match. They do now seem to be addressing their cost base, and there is never ending talk of a buyer, so I could see me dipping in some time over the next few weeks.

gadgetmind

IronWolf wrote: »

But I cant value something like a media company, because I have no idea if they'll still be able to get contracts in 10 years and what their earnings will be.

The only media company that ticked enough of the boxes for me was Reed Elsevier. They seem to have done a great job of switching from paper to digital with (mostly) good timing and have plenty of profitable strings to their bow. However, I bought at 450p and regard the current 540p as a hold. This is fortunate as this holding is in my wife's unwrapped LTBH dividend portfolio where I can't do much/any profit taking due to CGT.

TDM850

Lots of useful stuff here MyLastFiver. Here's my two penn'orth

1. What are the factors within a company to take into account when deciding whether to buy a share?

A) As many say here, it is usually a combination of profits, revenues and EBITDA (that's earnings before interest, tax, depreciation and amortisation) performance over a number of years, the management team, track record etc, sector potential, dividend yield and a host of other factors. On a more simplistic level, if you work within an industry or sector already you'll know the players in the sector and have an understanding of the dynamics that drive the business - look for sector laggards and ask if the discount is justified etc

2. Are there websites which enable you to find this information quickly and easily?

A) There are many website out there, although if you are looking for a single page of information on a stock, the best fundamental info out there is probably at Traders Own. Go to http://www.tradersown.co.uk/quotes.html , type in any UK listed company name and see what comes up