600 up more than 200% since its low

As I mentioned last week, one of the columns I like to read in the FT weekend is ‘Trader’s Diary’ by David Schwartz. However, it is rare that Schwartz has ever mentioned a company that I also have an interest in. This week there was a connection though, apparently he holds shares in 600 group which is a company I briefly held in 2004. I remember at the time being attracted by an 8%+ dividend. I held the shares long enough to receive the juicy dividend, but either by luck or judgment I sold the shares shortly afterwards for a slender profit. I’d like to think that it was judgment, but it’s likely to have been a combination of the two! Anyway, the share price fell shortly afterwards and languished at low levels for some considerable time. Subsequently, I didn’t really take much interest in its fortunes.

However, the share price has been recovering from less than 10p in 2009, up to its present value of just over 30p. Schwartz believes that there is far more upside to come. His argument is very persuasive, so I’ve just had a quick look at the half-yearly results and balance sheet. From a cursory glance it does look to represent good value. It appears to be currently valued at about £16m with a net tangible asset value of £21m. The results at half way do look encouraging, as does the outlook statement. My only concern would be that there appears to be less than £0.5m cash.

When I visited the 600 Group BB, the last post was March 19^th. I like quiet BBs it often means that the shares have been overlooked, although of course it could be for good reason. Not in this case though I suspect, probably just unfashionable (another good sign).

What did make me laugh is that Cockney Rebel was amongst the last few posters. Over the years, it’s amazing how often CR and I end up looking at the same companies! We’re either making good choices or alternatively making the same mistakes. Touch wood, I think it’s been the former rather than the latter.

I would point out that it is not my intention to purchase shares in 600 Group, but I would research the company more thoroughly if I was looking for bargains at present.

The ‘My Portfolio’ section of the FT was written by John Lee this week. I would describe John Lee as a medium/long term value investor, and occasionally I have held one or two of the same stocks.

One of the stocks John Lee and I have both held is Clarkson the shipping company. I bought shares in Clarkson in 2002 for about £2 with a 7%+ dividend attached. The share price did initially fall back to £1.40ish I seem to remember, but Clarkson continued to pay the dividend, and I patiently held. I did eventually sell them for a very good profit, but in hindsight I should have held on further. Clarkson’s shares are now about £13, and I believe that they have had a progressive dividend policy. John Lee may still be a holder, although I have no idea since he hasn’t mentioned them in his column recently.

If any of you have read my blog on a regular basis (and many thanks if you have) then you will understand why I tend to hold shares for longer than I did when I first became interested in stock picking. One of my rules is buy as cheaply as you can then hold on tightly unless the story (big picture) changes. It’s incredible how many potential multi-baggers are out there if you just catch them at the right time.

Down and out?

As usual I picked up the FT Weekend today and had a glance through my favourite sections. Whilst the FT is a quality weekend paper, at £2.50 a copy, I suspect it's the most expensive. At the other end of the spectrum was the Daily and Sunday Sport. Notice the past tense. On Friday Sport Media's shares (the owner of the papers) had been suspended from trading on AIM, and by the end of the day it was announced that the company was going into administration. Obviously this is sad for all shareholders and employees. I might add that I am not a holder of these shares or indeed an employee.

Whilst I still like picking up a newspaper (not the Daily or Sunday Sport I hasten to add) from time to time, people like myself are getting rarer, and it is clear that all newspaper groups will need innovative ideas and restructuring to survive in the 21st century. Sadly it appears that Sports Media couldn't adapt quickly enough with the debt burden they were carrying. Before shares were suspended they traded at about 1p, a mere fraction of the value they once held.

I mention the demise of Sports Media for the following reason. At the moment I have HMV on my monitor, and it has been there for quite a while. Shares in HMV recently fell to a nadir of 10p, but have since recovered a little to 15p. Whilst I do keep an eye out for potential recovery stocks, it most unlikely that I'll risk purchasing shares in HMV.

Just like the newspaper groups, HMV has rapidly become a dinosaur where it was once a dominant player, and to survive it really does need to reinvent itself quickly. If it does, and does it successfully then investors at these levels will be hansomely rewarded.

In 2002/2003, a company called ASHTEAD looked in desperate trouble, and I saw its shares plunge to around 2p, in fact I remember at one point you could buy shares for 1.5p and I was very tempted to take a punt. ASHTEAD did recover and over the course of the next two/three years the share price reached well over £3. Whilst I did invest in ASHTEAD, and made a very healthy profit, I didn't have the nerve to risk a punt at 1.5p. If only I had. £1000 invested would have ballooned to over £200,000 within a very short time frame.

However, ASHTEAD's recovery didn't depend on the company reinventing itself, and hence when better times arrived the business thrived. HMV is a totally different kettle of fish. For it to survive it effectively needs to offer a different service. For this reason I'll probably never take the gamble.

On a different note, I see that China Shoto was one of the week's star performers. I don't know anything about the company, but according to the short article in the FT, they are delisting and offering shareholders £3.80 per share. This is exceedingly refreshing news since the offer is not far short of CHNS's all time high (from a brief look at the chart). Normally when companies decide to de-list shareholders either have to hold shares in an illiquid private company, sell out at very low prices before the company delists or are made a derisory offer. What a nice change to see shareholders getting a fair (even generous?) offer. However, surely this should be the norm and not an exception.

Happy hunting.

What's in a saying?

I do love some of Warren’s Buffett’s quotes which serve to illustrate his investing style.

However, there are some sayings linked with trading and investing that are rather less endearing.

When visiting the bulletin boards, one of the sayings that crops up frequently and does tend to grate is “Let the trend be your friend”. Now I am sure that this undoubtedly hails from a very successful trader, and perhaps somebody can enlighten me on the comments section, but what an absolute load of boll**ks! Perhaps it’s because it has been quoted out of context on the bulletin boards? I have no idea, but if you take this to its logical conclusion then share prices in an uptrend should continue to infinity and beyond, and conversely those in a downtrend will eventually reach zero. I can only assume that the phrase is linked with charting, and spotting an uptrend or downtrend early on, and then recognizing when the trend has reversed. It smacks of momentum trading, but it’s a bit unfortunate for those who jump on the trend just before it’s about to change direction!

I’m not a great fan of charts (just traces in the sand as far as I am concerned), but I do agree with Anthony Bolton that they can be useful in identifying entry points when buying. There do appear to be clear support and resistance points on most charts, and if you have done your research on a company, and its share price appears to be bouncing up and down in a range, then it can be worth trying to time your purchase at the bottom of the range. Of course this can be dangerous because the share price may not get back to its support point before breaking out. More often than not, I just buy at prices that I regard as cheap.

Another well worn adage is ‘sell in May then go away and don’t come back until St.Leger’s day’. I’ve often seen statistics that appear to bear this out, but as a stock picker in the UK market, I quite often find the summer months the ideal time to buy. The markets can be quite quiet and prices can drift down a little, making attractively priced stocks even more appealing.

The old chestnut, ‘Don’t keep all your eggs in one basket’ is used in many areas of life, but is often used to advise investors to keep a diversified portfolio. However, when it comes to buying stocks, I prefer Buffett’s stance. He said words to the effect that you can keep your eggs all in one basket, but keep your eye on the basket.

I don’t think I’ve ever held more than 10 stocks at any one time, and whilst some may consider this foolhardy, fortunately it has worked for me, and I’ve managed to survive and prosper through arguably one of the worst bear markets in recent history. Perhaps I’ll come a cropper in the future, but for now I think I’ll stick with it.

If anybody is invested in Avanti Communications then the trend is certainly not your friend at the moment. As mentioned in a previous blog, it’s a share that is on my monitor chiefly out of curiosity. I note that the Directors are still buying shares, and it will be fascinating to see whether it’s ‘the trend’ or the Directors that know best?

It’s pretty quiet where my investments are concerned, although a couple of news items on the DCD Media website give me confidence that the company is prospering. Both Prospect and September (two fully owned production companies) are hiring senior staff to help expansion in both the US and the UK.