Rational share strategy

Linton

Glastoun wrote: »

Yes, dividends are in there as well - the last dividend was the highest for four or five years, although it will likely be lower next time, and I don't hold enough shares for it to make a huge difference.

Barring any unforeseen incidences, the next 'news' will probably be the actual profit announcement in the middle of April - if this does turn out to be around £120m, which was the 'warning' figure, what is likely to happen to the share price?

* nothing, because it has already been priced in; or

* slight rise, as I've read somewhere that most shares rise around media-circulated profit announcements due to increased trading from amateur investors (i.e. people like me)

I would expect a slight rise because:

1) Investors who would like to buy may well wait until profits are confirmed

2) Investors who didnt like the drop in profits would have already sold on the profit warning

marathonic

Linton wrote: »

As a new small investor it is not a good idea to buy a single share. Any major fall could wipe you out. You would be better advised to choose a fund where your money is spread over possibly hundreds of shares and so minimise the effect of individual companies failing.

Agree with this completely and, especially for young people, the biggest risk isn't actually losing 100% of your initial investments - it's being put off investing in the stock market for the rest of your life (as has happened with many people who now regret it).

merlingrey

Remember you are buying a business not a share price.

You know that old saying about people knowing the price of everything but the value of nothing. That would apply to you if you do not do enough research and come to informed decisions.

simarks

merlingrey wrote: »

Remember you are buying a business not a share price.

You know that old saying about people knowing the price of everything but the value of nothing. That would apply to you if you do not do enough research and come to informed decisions.

You need to consider both the share price and the business.:T

IronWolf

gkerr4 wrote: »

i just can't agree with this - if the price drops that much, either your research was wrong, or the market changed - either way, you need to revalidate your investment rationale and ask "would i buy this share at 75p" - regardless of the price you previously bought. If the answer is 'yes' then great - but the answer could well be "no, they just announced a profit warning", or the market for that product has dried up or whatever - in which case, you need to cut losses and move on.

Not necessarily, a 15% drop can happen for macro reasons which have nothing to do with the company itself, i mean look at what happened when everyone was worried about the euro crisis.

Assessment of the business should not be done based on share price movements, it should be done based on information

Radiantsoul

I think it looks like an ok share. The P/E ratio is around 8.

They have about 12m square foot and generate £125m. Which is about £10 per square foot. I compare this against John Lewis(exc Waitrose) which is generating £38 per square foot. Sure there are differences in accounting definitions, location, etc. But if Debenhams could get close to £20-30 per square foot and get its P/E ratio close to 20 then it could look impressive.

Minus side is it has a lot of debt - 150m RCF(upto £400m and £250m senior loans). Which is at about 2.3% and needs to be renegotated this year or next. And it looks quite dul compared to John Lewis, but probably lacks the cash to jazz up its stores.

Glastoun

The share price is at my break even point this morning (within four trading days, and even accounting for £27 fees on a £500 trade, which is no bad going) so I could get off this sorry rollercoaster here if I wanted to, but will let it run as it's quite fun following it. Although I no longer refresh the share price every ten minutes.

I've decided that what I outlined in the OP was a trading strategy, not an investment strategy, although I did use the word 'punt' - hopefully if I get larger sums of money later in life I'll have got the trading bug out of my system and not make expensive mistakes.

The comment about the shirts was off the cuff (you're welcome) but I do like their ranges and their stores - maybe I'm spoiled as the Glasgow one is 5 floors and probably the best department store in the city - and they're definitely a better shopping experience than M&S/BHS and the like. I didn't consider John Lewis as I never shop there myself, but Debenhams also have a strong online brand, and although they're quite heavy on promotions they seem to have a loyal band of customers. So I can't see them collapsing any time soon. Will see what happens by Christmas.

Glastoun

Correction, I've made back my buy fee, still needs to go up a bit more to make back the sell fee.

Radiantsoul

John Lewis are a partnership and so you can't buy them. I think the point is they are very much top dog of the department stores at the moment. Presumably it would take years for Debenhams to get to that level, but the rewards are potentially high.

marathonic

Glastoun wrote: »

Correction, I've made back my buy fee, still needs to go up a bit more to make back the sell fee.

Well, as you've already bought, it's time to forget about the buying and selling fees - they are inescapable.

At this point, you should only keep an eye on the company and it's associated news stories/press releases to determine whether anything changes that requires you to sell.

To many people concentrate on the buying price when deciding whether or not to sell. This isn't the correct way to invest as the buying price is now irrelevant.

Instead, ask yourself "if I weren't invested in this company now, would I consider investing in it".

If the answer to this question is no, it's time to sell.