Stocks and Shares For A Dummy!

jagari

OK, I'm at a point where I'm thinking about investing in stocks (UK).

I'm trying to wrap my head around the concepts but I was looking at a particular stock today and am confused by something.

I used ADVFN to get these figures:

Thorntons (LSE:THT) is currently 25.5 per share. Reading its reports etc it looks in pretty bad shape, yet in the last couple of days, share price has soared. I'm guessing thats some kind of blip because the figures on this company dont look good but anyway...here's my question...

If the share price is 25.5p per share, there are 68.37 million shares in issue and acording to ADVN the total market capitlisation is approx 17 million.

Now, if you look at the reported fixed assets of the company, they are reportedly at 52 million.

Am I completely stupid in thinking that if I had £17 million, I could try and buy all the shares (or a majority of them), and then just sell all the assets for more than I paid for the company and return more money to the shareholders than what the company looks like it will return to them for the foreseeable future?

Whats the correct way to read those figures?

Thanks! And yes, as you can see I dont really understand what Im talking about )

chris_m

jagari wrote: »

If the share price is 25.5 and the share type is ORD 10p does that mean it will cost me £2.55 per share, or 25.5p?

You would pay the current market price, 25.5p.
The 10p is the price the initial investors paid when the shares were originally issued, which went directly to the company.

After issue, shares are bought/sold independently of the company and the money from a sale goes to the selling shareholder, less any dealer's commissions.

Glen_Clark

Welcome to the forum jagari.
The shares would have been 10p when issued, but now sell for 25.5p

68.37 million shares at 25.5p is about £17 million

It may well £52m in assets, but it will also have debts, which makes it worth less than £52m. Like a £200,000 house with £100,000 owing on the mortgage.

As to whether the shares are a good buy, I haven't a clue

jagari

Glen_Clark wrote: »

It may well £52m in assets, but it will also have debts, which makes it worth less than £52m. Like a £200,000 house with £100,000 owing on the mortgage.

As to whether the shares are a good buy, I haven't a clue

Ah, of course....

Using the same formula then, current liabilities are £56m...

Total assets (inc 37m in stock!!!) are about £110m
Total liabilities are £90m (guessing most of that will be property which will be worth even less than paid price these days)

When you look at these figures together the price of £17m seems WAY overpriced....

The company looks screwed...I won't be investing :-)

Thanks for the clarity...

ViolaLass

Isn't share price also a reflection of that company's potential?

jagari

Yes, I believe so, but in the case of THT, there only looks to be bad news coming...

In store, own store sales and franchised store sales are slowing. Their only growth 'potential' seems to be with the supermarkets, but they already seem to be in most of them, so not sure how they can 'grow' more. The problem with the supermarkets is that whilst sales are up, margins are squeazed very tight and this is taking a toll on profits.

Unless they sell off their highstreet stores (which they say they'll do in their annual report), I can't really see how they're going to grow profits...

When was the last time you shopped at Thorntons? And did you used to shop there more?

Greggs, on the other hand...I walked through town today and the queue was hanging out the door! Expansion into airports and still have room for highstreet expansion. Whilst youre out to the poundshop, chances are if there was a greggs close by youd pop in for a pasty...

Anyway..like I say, I'm trying to understand how this all works and have signed up to a couple of stock trading games to test my thinking...

If anyone can recommend other ways to 'try before you buy', I'm open to hear them!

Lokolo

Know the company inside and out and have a view on what (and why) you think they are going to do well.

Thornton's are very much a failing company, a little like HMV. I am staying away from that retail area as I don't know it well enough.

Good luck.

ViolaLass

I used to shop at Thorntons, many years ago, but the arrival of Hotel Chocolat made me switch completely. I was given some Thortons chocs for my birthday and they were rubbish so I don't miss them. I'm certainly not saying that they're a good investment, just musing on what makes a share price - I hadn't thought about it too much before.

jagari

Lokolo wrote: »

Know the company inside and out and have a view on what (and why) you think they are going to do well.

Thornton's are very much a failing company, a little like HMV. I am staying away from that retail area as I don't know it well enough.

Good luck.

So if THT are a failing company, should I consider 'shorting' it? I realise that the change in maagement etc and the promise of letting go of poor leases might temporarily spark up the share price but ultimately this share price HAS to go down??? but with so few points available...25.5??? is it even worth it?

Ifts

jagari wrote: »

If anyone can recommend other ways to 'try before you buy', I'm open to hear them!

Hi jagari and welcome to MSE. Well done for trying to educate yourself before diving in.

Its definitely best not to rush into things. Read up and learn as much as you can before you part with any money.

When you think you are ready to have a go at trading you can try out your strategy by having a practice first without committing real money, try it for a while and see if its something that you think you could be good at.

Here is the link for the Share Centre*: Practice trading shares with FREE practice account, you will have to register but its free.
Once you have registered you will have access to advice to help you get started and research tools so you can learn more about the market.
Bear in mind that a practice account does just that, it gives you an idea how things operate, but its very different in reality when you're staking real money, emotions etc.

Always do your own homework/research. Only invest money that you can afford to lose, should the worse happen.

Some books here that will help you get some knowledge of investing:
The Intelligent Investor (by Benjamin Graham)
Naked Trader (Robert Burns)
Smarter Investing (Tim Hale)

Share Dealing sites I use are: http://www.x-o.co.uk/ (£5.95 a trade)
and also: https://www.share.com/a/index.html

The Motley Fool site is good place for information regarding shares: http://www.fool.co.uk/

Good luck.

*I'm sure there are other companies that offer practice accounts too.

pqrdef

jagari wrote: »

So if THT are a failing company, should I consider 'shorting' it?

The prospects are already in the price. If the shares were bound to go down, they'd already be cheaper. Unless you know something that others don't, or you think the market is misjudging the situation.

But a lot of the profitability of a company comes from intangibles, like brand image. Warren Buffett says he looks for "long-term competitive advantage" - hence Tesco. Tesco should be unbeatable if they get it right, because even if others also get it right, Tesco have got the head start.

But they could also get it wrong. I haven't bought Tesco, because the new boss's vision of the future doesn't match mine. I expect he knows more about it than me, but I need something to believe in.