Investing in individual shares

doe808

I worked in the sector, and the company in question consistantly stood out from others. Otherwise I would have no idea how people would have the time to research properly.

Aretnap

eskbanker wrote: »

But there's an element of confirmation bias in that observation - the shareholders in Thomas Cook, Carillion, Enron, etc, are hardly going to come into your bank to tell you of their misfortune, and the same applies to those whose companies don't pay dividends....

And also, young people who do invest in individual shares are unlikely to be turning up at banks to pay their dividends in in the form of cheques. What are cheques, grandad?

GiddyInvestor

I dabble in 9 large UK stocks as 20% of my overall S&S portfolio, more for interest than anything. The FTSE has gone up and down and is about the same as when I started a year ago. With the good 4 to 6% dividends I think I have received about 8% growth. I am trying to buy stock that seems undervalued and reduce holdings when they get towards long term highs and this seems to be paying off. Avoiding tobacco and alcohol companies as I think the markets are likely to reduce. No problem at the moment with oil. Will go into house builders only when Brexit issues have been resolved.

benbay001

I am a contrarian/ value investor.
I currently own shares in two companies. Xp power and speedy hire.
Xp was bought between November and march at an average price including costs of £22.6.
Speedy was bought in one buy at the end of August for 47p avg.
Im 15% up on xpp inc dividends and 20% up on Sdy.

Buying great companies because you have fully researched their fundamentals and believe they are under valued makes sense to me.

I have work mates who buy shares in individual companies, usually because the share price chart looks tempting or because the company has an exciting story and then they wonder why they are 10% down. Its people like this that create the "you can't beat the market" statistics

quirkydeptless

I own shares in just two individual companies which I have held from the 1990's.

SSE, my first ever share purchase (OK, it was Southern Electricity when I first got it), just so I could have one. Still got my nice paper certificate :cool:. I also bought PowerGen, National Power and got given some free National Grid shares, but all these got sold off. Despite a recent downturn, they have done pretty well for me, even though I may have to end up selling them to Jeremy Corbyn

The second is Lloyds Bank, which I got by accident by not selling my free Halifax shares, and are worth considerably less than if I had sold them straight away . Despite that, they serve a great purpose by being a constant reminder of how pear shaped it can go for an individual company share price.

Together they make up less than 1% of my portfolio, so they aren't an important factor, but I like to hang on to them none the less and collect the dividends.

jamei305

The only individual company whose shares I held were Totalise, which was an ISP that gave away free shares during the dotcom fever for signing up for free to their 0845 internet dial-up service. I sold them for about £700 which was nice.

over_and_over

MaxiRobriguez wrote: »

why you do it

1. I started doing this over 20 years ago, so why change now? Changing your strategy too frequently is a bad way to invest (and not only where individual shares are concerned), so why not stick with what I have? Or, to put it another way: I'm stubborn.

2. The main risk of individual shares is poor diversification. I am mitigating this by
(a) Reducing the size of any individual share holding which becomes too valuable (as a percentage of my total in equities). Always assume that any one company's shares could be becomes worthless.
(b) Holding collective investments for shares outside the UK, to diversify my individual shares, which are UK companies (though some of them do business very globally). I still have roughly 1/3 of my total equities in UK companies, which is perhaps too high.
(c) Not caring too much if my investments do poorly. I am pretty frugal, relative to my means, so it won't matter too much if my investments do worse than they might have done if better diversified. I wouldn't be so keen on relying on individual shares if I needed them to do well to avoid being very poor in retirement.

3. It allows me to filter out companies which don't meet my ethical criteria — which are unlikely to be the same as your ethical criteria, or as the criteria of any fund sold as "ethical" (and the latter are typically pretty expensive); my criteria have also evolved since I started out.

4. It can be cheap, when you have very long average holding periods for your holdings in individual shares, as I do. When I started out, I reckoned it was cheaper than any available collective investments. That is no longer the case, now that very cheap trackers are available; at best, the cost of holding individual shares might be similar to the cheap trackers — but even this is only true if you have total investments worth perhaps £100k+: any less, and you will either pay excessive dealing charges or be compromising on diversification. But cheap trackers wouldn't give me an "ethical filter": see point (3).

5. Because I can. Entertainment value. Ego-boosting. I can imagine I'm clever at doing this. Or at least, that I'm clever enough to do it without seriously damaging my wealth. (The latter might even be true . )

6. It doesn't take too much time now, given my long average holding periods. But that is after investing rather a lot of time in the past reading investing-related material. I could have saved a lot of that if I'd never bought individual shares.

what your situation is in terms of age, goals etc,

40s. Broadly for retirement, perhaps early. My highest-earnings days may be over, so some drawing down of equities may happen relatively soon; but I have plenty of cash and bonds as well as equities, so I won't have to sell any equities for quite a few years (if conditions are unfavourable for selling).

what criteria/fundamentals you look for when choosing to buy and indeed sell and how/when you got started.

Started by buying some shares tipped in Investors Chronicle or newspapers, which is a dreadful method. Though one thing I did get right from the start was holding shares for long periods (at least for years, preferably for many years).

It is now more about buying quality than about buying cheap, i.e. established businesses: already profitable, and in a niche which they can't easily be displaced from. Though it's a mistake to pay too much for any share. And if a good business is carrying too much debt, the shares won't be a good buy. And if a share mostly seems OK, but I have a niggling doubt at the back of my mind about one thing that might go wrong, then it's probably best not to buy, because it only takes one thing going wrong.

Well, the last paragraph is what I tell myself I'm doing. But let's be honest: I'm probably bluffing. It's all pretty vague, isn't it? As Feynman said, the first principle is not to fool yourself, and you are the easiest person to fool. I like to think that I'm so sophisticated that I know I'm fooling myself, and therefore I'm not being fooled after all .

IMHO, a key point is: it is possible to be very competent at assessing the value of companies' shares, and yet still underperform a suitable benchmark. And not just because you might be unlucky (it's always extremely hard to separate luck from skill in investing). But also because the rest of the market may be made up of investors who are on average even more competent than you. This is one reason (in addition to their high charges) why so many active managers underperform; they are not idiots, they are mostly smart people; but they are mostly competing with one another, not with amateurs, and they can't all be better than average.

So, coming back to me (or you) picking individual shares: even if I do know what I'm doing (which is unlikely), it doesn't follow that it will be a profitable activity, relative to a lower-effort method of investing using collective investments.

Also - the key question - have you outperformed/underperformed indexes?

I haven't done a proper comparison for several years. When I last did one, my individual shares were overall marginally ahead of the FTSE All Share Index (which seems a reasonable place to start, since I'm only buying individual UK shares). But that probably means I was a long way behind a global index.

itwasntme001 wrote: »

overall i think i have outperformed even the best active funds

Think? Have you actually measured performance versus a benchmark or not? I suspect most investors in individual shares have never done so (I have but I'm not up to date with doing it), and are only happy because of generally rising stock markets. Or in other cases, they don't even know that they've lost money overall.

arnoldy

Why I buy Individual Stocks:

• I don’t like giving 1-1.5% (HALF of my dividend income!!) for someone else to buy UK stocks I could easily buy myself. Over time that saving is going to have a massive positive on your investments.
• As a small private investor I can buy individual stocks on dips, and also in quantities that don’t move the market
• I enjoy it, it’s sort of a hobby
• I stick to UK, European and US markets – if I did decide to go and invest elsewhere I would consider an Investment Trust not a Unit Trust. But at the moment I’m not investing outside of UK – risk of currency loss to great when Sterling recovers IMHO.

My situation
53, have a Stocks and Shares ISA, a SIPP and a preserved DB pension. I’m hoping to go at 55-57 into a comfortable but modest retirement. Wife has similar.
What criteria:

• They have to pay dividends however modest – helps keep them honest
• Tend to avoid really high dividend payers like BT, L&G etc and usually buy shares that yield 1- 4.5%. But I do hold LLOY, RDSB, BP.
• Avoid private equity cast offs : AA, Forterra, ConVatec, Aston Martin etc
• Tend to go for FTSE 250 or Fledgling – more growth potential
• Also shares that may be a takeover target – British Technology, Engineering and Industrials
• At the moment buying more BARC after recent results

Results
Maybe slightly ahead at the moment (I benchmark my portfolio against FTSE 100 total return).

eskbanker

arnoldy wrote: »

I don’t like giving 1-1.5% (HALF of my dividend income!!) for someone else to buy UK stocks I could easily buy myself. Over time that saving is going to have a massive positive on your investments.

That's a false dichotomy of Trumpian proportions!

If you're benchmarking your performance against the FTSE100 then surely the logical cost comparison would be a FTSE100 tracker, which Vanguard (for example) provide at 0.06% OCF?

Thrugelmir

Interest in stocks and shares came from looking at the back pages of the pink paper in my late fathers office on a Saturday morning. Some years later my interest was rekindled when I worked in the investment department of Friends Provident Life Office.

In the main dabbled with funds and investment trusts for many years, along with stagging new issues. Held a few more individual shares when PEP's were initially launched. Though wasn't particularly succcesfull.

For some years was building a pension through Equitable Life. When that boat hit the rocks. After some umming and ahing decided to self manage. Initially used investment trusts in the main. From there moved the funds into a SIPP to reduce charges.

With no longer having any parental responsibilities. Filled my time with reading, attending, listening and researching. Using the experience gained from my time spent in the world of finance. I started investing more of my money directly in Company shares.

what criteria/fundamentals you look for when choosing to buy

An understanding of the business model.
Cash generation
Owners having skin in the game
Organic growth
Specialised and focussed
Fair treatment of smaller shareholders
Good comms
Ability to buy shares (and build a sizable position) at a fair value
Long term buy
Under the radar of institutional investors and major fund management groups
Avoid companies with questionable accounting

have you outperformed/underperformed indexes?

Being a contrarian investor can be a very lonely place. As you might be buying a share which others are shunning. As the only person I am accountable to is myself. Providing I'm meeting my personal financial objectives. I tend not to get hung up on index comparisons. As they'll inevitably be periods of under and over performance.