Why does anyone buy individual shares?

abz88

benbay001 wrote: »

Your attitude sucks.

Just because you arent capable of doing something, dont assume others arent.

Im 27, have been investing for just over a year, have a book shelf full of value investing books and probably spend 2 hours avg per day learning/ researching.

Being up after less than a year isn't exactly proof that you are capable of beating the market in the long run (10 years plus) which is the point of low cost tracker fund. Also, if you think that 2 hours a day learning and researching is enough time to fully understand the companies/markets you are investing in then the odds are you are in for a rude awakening. Fund managers spend there entire working day researching and reviewing portfolios. What makes you think that, in the long run, 2 hours a day beats 8 hours a day with access to industry contacts etc?

I invest in tracker funds as I don't have the time to invest full time. I could spend 2 hours a day, but that would likely only get me as far as reviewing annual/quarterly accounts and reports properly for a single company never mind comparing that to their competitors, industry movings, potential government legislation that could affect future performance etc.

abz88

Thrugelmir wrote: »

Buffet (as in BH) is now the market. In the days when he was building holdings in company's. Trading settlement was paper based. Easy to hide ones activity. Using multiple brokers concurrently to buy smaller parcels of stock. Now there's total transparancy. Prices react within seconds to major activity.

When Buffet talks about investing in trackers, I understand it to being aimed at individual investors as opposed to Investment companies. IE, his personnel money goes into tracker funds but BH is into companies. Another important thing to remember with BH is that they tend to buy shares with preferred stock status, so the price BH pays is below what an individual investor pays. As you stated, as soon as BH buy, the market moves and they can make a fortune based on their preferred share price vs. what the market price becomes once the news of their investment comes out.

benbay001

Prism wrote: »

You say that you are spending 2 hours a day at the moment on research but I think its fair to say that most people want to spend close to zero hours a day on it and therefore funds are more appropriate for them.

Of course i would agree.
Most of that 2 hours is learning, rather than reading the companies i am in.
Ultimately i am confident in the businesses that i am in for the long term, 5+ years so shouldnt really need to check up on them, short of reading RNS news, but that still doesnt stop me.

I also really enjoy the research and following the business. A hobby that makes money, if you will.

Prism wrote: »

If you take IAG for example, it provides very little return at all in terms of its overall long term price, however it does have a good dividend. To make higher returns of it you need to sell on peaks and buy on dips which most people find difficult to do. You also have to factor that airlines are at higher risk from going bust and can drop significantly in value due to outside factors like fuel costs, wars, weather etc. Volatile stocks like that can be good ways to make additional returns but it can also go terribly wrong too.

IAG is my holding i am least confident in. I carrys alot of debt. I feel the debt is easily serviceable by the companies cash and profit. But as you say, that may change.

As for its share price being stagnant for a long time - i guess that is what lead to it being a value play for me. To me the share price has remained stationary, yet its P/E has been falling as the business grew. As a value investment im expecting the share price to increase as the P/E moves nearer to the industry average, as well as dividends and profit growth.

benbay001

benbay001 wrote: »

Of course i would agree.
Most of that 2 hours is learning, rather than reading the companies i am in.
Ultimately i am confident in the businesses that i am in for the long term, 5+ years so shouldnt really need to check up on them, short of reading RNS news, but that still doesnt stop me.

I also really enjoy the research and following the business. A hobby that makes money, if you will.


IAG is my holding i am least confident in. I carrys alot of debt. I feel the debt is easily serviceable by the companies cash and profit. But as you say, that may change.

As for its share price being stagnant for a long time - i guess that is what lead to it being a value play for me. To me the share price has remained stationary, yet its P/E has been falling as the business grew. As a value investment im expecting the share price to increase as the P/E moves nearer to the industry average, as well as dividends and profit growth.

Thrugelmir wrote: »

IAG is a cyclical stock not a value stock.

Any stock can be a value stock, as long as the stock is substantially below its true value.

abz88 wrote: »

I could spend 2 hours a day, but that would likely only get me as far as reviewing annual/quarterly accounts and reports properly for a single company never mind comparing that to their competitors

Youre buying one new company a day?

JustAnotherSaver wrote: »

Question for the ones who have cockily replied: well *I* am beating the market.

What is your golden key to unlocking this guarantee that means you have not just simply been ‘lucky’?

I get the impression your post was just another dig, especially as you used the word "guarantee" which i dont think anyone has claimed? But ill will have a go at answering.

I firstly look at broker buy ratings, checking to see whether:
1) Am i likely to be able to understand the business?
2) Is the broker target price sufficiently higher than the current selling price (30%)?
3) Is the market growing?
4) Does it trade at a current and forward P/E of less than 12

If all of those are a yes, then i will have a look at the companies past results.
1) Profit for most of the last 5 years
2) Profit has grown over the last 5 years
3) Growing net assets
4) Dividend coverage
5) In the case of IAG i spent a while checking out whether i believed their debt was affordable.

If a company passes all of those then i will read the company's last 2 half year results, especially that statements from directors.

Thrugelmir

benbay001 wrote: »

Any stock can be a value stock, as long as the stock is substantially below its true value.

Guess my preference is for investing in deep value then.

My personal view of IAG is that it operates in a market with some oversupply of capacity, faces rising fuel prices and temperamental Unions leaves it somewhat exposed. Having been impacted twice this year by disruption. British Airways is no longer my preferred supplier.Perception of bfand cannot be understated.

cloud_dog

I love these discussions, they roll out periodically. For myself, I don't understand why people need to see the world in black and white; it rarely ever is, usual many shades of grey.

I invest in one or two individual stocks (used to be more, usually AIM), and I do it because I enjoy the analysis, the challenge. I don't concern myself with other people's or index's performances.

MaxiRobriguez

Few reasons I do it:

1) It's not a case of one or the other, you can have both.
2) I enjoy the research.
3) I'm very risk tolerant so adding single stock exposure suits my investing needs.
4) I'd invest in funds but I simply don't trust the financial industry or managers to do what's best for their clients over the long run.
5) I can more cleanly adapt my portfolio to suit.
6) I can boast about it. I've made 14% on my seven stock holdings in three months, how is your passive index doing?

I don't expect my single stocks to always outperform and I'm not sure I *expect* them to outperform indexes at all. I hope they do, it's a calculated gamble and I'm ok with that, especially as they only make up 15% of my overall portfolio. The rest (apart from one EM fund) is in index trackers.

arwain

MaxiRobriguez wrote: »

I don't expect my single stocks to always outperform and I'm not sure I *expect* them to outperform indexes at all. I hope they do, it's a calculated gamble and I'm ok with that, especially as they only make up 15% of my overall portfolio. The rest (apart from one EM fund) is in index trackers.

This seems very sensible to me. You do need a decent sized portfolio to start with though, if your only using 15% of it to purchase individual companies spread over 7 or so stocks then due to dealing costs even with someone like IWEB then that could be a problem for people in the first few years of their investment journey.

Can you or anyone recommend a good book on stock picking?

Alz1986

I feel much happier with my individual shares as opposed to funds. The reason? I dont have to pay a silly fee each year when the fund has been performing poorly.

They mug us off by saying its hard work to keep us all buying into their scheme.

DairyQueen

benbay001 wrote: »

Your attitude sucks.

Just because you arent capable of doing something, dont assume others arent.

Im 27, have been investing for just over a year, have a book shelf full of value investing books and probably spend 2 hours avg per day learning/ researching.

The overall value of my portfolio is low. I completed an apprenticeship in September, subsequently bought a nice car on loan and am blitzing the loan before making any more ISA contributions.

My Portfolio currently holds
SDY - 28% £447
TIFS - 9% £859
IAG - 4% £644

Finally: SMT - which is currently -1%

As i said, which you so quickly dismissed, if you exclude SMT (which i think is fair, considering its an investment trust, rather than an individual company, i am up 31% over the year.

(£1963-£1497)/14.97= 31.1%

If you include SMT
(£2584-£2118)/21.18= 22%

Please point me in the direction of an index fund that would have made more.

My returns would have been higher if i wasnt playing with such small amounts as fees make up a significant amount of the cost per share.

So, you stand to lose a couple of grand at the age of 27. Big deal.

I have a feeling that you may adopt a somewhat less cavalier attitude when you gain 30 years and are managing several hundred thousand.