A typical problem with value investors is that they sell too soon.
Some of my quality shares have had a good run, and they’ve touched into the "expensive" zone in my own estimation. The companies in particular are BATS (Brit Amer Tobacco), DPLM (Diploma) and DNO (Domino Printing Sciences). I find myself reluctant to sell them, though. Should I be merciless, and attempt to play Graham’s master game of "buy low and sell low", or should I stick to his other advice, that if you intend to hold for the long term then you can feel free to ignore the periodic ups and downs of Mr Market.
I mentioned a few weeks back that I had sold BATS out of my online defensive portfolio, whilst retaining them personally, on the basis that they looked overvalued. This hasn’t affected their performance, though. One thing I have noticed about BATS, is that it has a definite "channel" over the last couple of years. When it looks a little cheap, it tends to catch up, and when it gets over-valued, it pulls back. Actually, Mr Market seems to appraise BATS fairly objectively. It’s unusual for him to go into manic-depressive moves over the company.
Staying away from tickers is a good way of building patience. Out of sight, out of mind. Plus, I’m making a concerted effort to reduce my trading. I’m still on course to make 2012 my "gap" year; although I will make trades where I feel there is a clear case. These trades were: selling PTEC (Playtech) over various concerns, selling TALK (TalkTalk) because I thought it was a cruddy company, and buying TSCO (Tesco) because it looked liked it would be a rare opportunity. Actually, what I thought would be "the trade of the year" turned out to be, ahem, overly optimistic. I was expecting a bounce in the price, which never happened. I bought at 327p, and the share price is at 324.9p. I seem to recall that Buffett bought in cheaper than me. He seemed to pretty much have picked the bottom on it. Nice footwork on his part.
ISA allowances are coming up soon, and I intend to invest then. I shall probably split it between a growth company, and a defensive. One company I’m quite keen on is OPTS (Optos), that make eye scanners. Newsflow seems very positive, it’s available at a reasonable price, and has a ROE of 23%, with a good balance sheet. Another company that I like the look of is SRT (Software Radio Technology). they make automatic identification systems (AIS) for the maritime industry. The shares had a good run-up since the beginning of the year, having been picked on the Motley Fool share competition. They took a major caning earlier this month – down 20-odd % in a day – on news that their results will be below expectations. The company’s sales are lumpy, so orders are expected to be delayed. I tend to get caught out on the iffy companies, though, so I’d probably be better off with OPTS. I wont top up on AFF (Afferro Mining) or SHG (Shanta Gold), for risk control purposes.
I’d be interested in hearing about any good growth companies that anyone fancies.
Playing it safer, I see the following companies as being attractive right now: AZN (Astrazeneca), RB. (Reckitt Benckiser), SN. (Smith & Nephew), TLPR (Tullett Prebon), and any of the supermarkets. I would also be interested in hearing about any good-quality companies, too, whether cheap or not. There are some that look good, but are far too expensive at the moment. I’m thinking of such companies as BAR (Barrs) – that make pink fizzy pop and the de rigueur drink of Glaswegians, particularly amongst the demographic that doesn’t know what "de rigueur" means (please don’t steal my car. AGAIN) – and EXPN (Experian) the credit risk agency, JHD (James Halstead) that make flooring (they do very well for a company that makes boring old flooring), PZC (PZ Cussons) that make personal goods including the famous Imperial Leather, RR. (Rolls Royce), SAB (Sabmiller), ULVR (Uniliver), and a few others. These are all companies that I’d be happy to hold for the long term; but their prices are unjustified currently.
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