R4E a great short in current market conditions?

I've just posted this on the Trakm8 thread. For the benefit of non-Advfn BB users, I've reproduced it here:-

Hydrus post 983 - "Michael I'm sure you can shake it off having bought so low."

Yes, as you know I was buying these in 2011 when they were in the low teens. All well documented on my blog, and on this thread. Let's just say I'm used to the gyrations in Trakm8's stock price, the illiquidity and wide-spread.

As an aside, I love these markets, although please note that I don't use gearing in any shape or form. It's an opportunity to pick up shares in your favourite companies at knock-down prices. If you don't have any spare cash to invest then just sit it out (provided that you have long term confidence in your holdings).

Investor's are an incredibly irrational bunch. For example even Domino's Pizza shares fell by 4.4% today. Even if nuclear war broke out the Brits would still be ordering Domino's Pizzas. I don't hold by the way, maybe I should?

For a bit of light reading you may be interested to take a look at this blog:-

hTTp://michae1mouse.blogspot.co.uk/2015/12/when-is-loss-loss.html

All factual, although Ashtead shares have fallen to a mere £9.32 since writing.

Anyway enough of my off topic musings. For the record Trakm8 is a great little company with great prospects and an undemanding rating for the growth it's achieving, but don't take my word for it or anybody else's. Do your own research and if you can't (DYOR that is)then perhaps take time to consider if stock picking is your bag.

By the way (off topic again) if savvy investors fancy shorting a company then may I suggest researching R4E. Shareprophets were buyers at 4.5p (share price currently 1.4p) and have again bought at around the current share price.

Please DYOR, but, if you'll pardon my French, R4E is an absolute sack of sh*te. They've been recently forced to conduct a massively dilutive placing, capital reorganisation etc to try and clear some debt. Even after this the company still has large debts and a small market cap. R4E's assets are negligible. The company was once again loss making at the interims. Effectively R4E is worthless. It's business is reliant on theatre land in London and New York. If there is a recession then this is a business that will suffer more than most. Imagine a recession and a terror attack. A weak and vulnerable business that may not survive. I hold no position in R4E. ;)

Bull or Bear market? Heads or Tails?

A good article appeared in this Sunday's Telegraph regarding the current market uncertainty:-

http://www.telegraph.co.uk/finance/comment/12103422/Help-for-investors-unfamiliar-with-Zen-like-calmness.html

I particularly love the quotes from the two legendary investors Peter Lynch and Warren Buffett:-

"Peter Lynch, the former Fidelity investment legend, put it well: “Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.”

Warren Buffett was just as forthright: “Unless you can watch your stockholding decline by 50pc without becoming panic-stricken, you should not be in the stock market.” "

I wholeheartedly agree with them, let's face it you'd be daft not too.

I don't normally comment on the gyrations of the main indices or macro conditions and prefer to concentrate my time on stock picking, particularly amongst the micro-caps. In my view, the current market uncertainty is a great opportunity to pick up shares where indiscriminate selling in thin markets is providing opportunities to pick up some bargains.

If I'm honest, despite the obvious wobbles in Asia (particularly China) I'm a little perplexed as to why there appears to be so much doom and gloom. Yes, I'm aware of plummeting oil and resource prices and the implications for oil and resource companies in general, but my simplistic view is that low oil prices coupled with historically low interest rates are generally good for most companies.

Clearly market sentiment isn't helped when Analysts start telling investors to sell everything. Possibly the worst advice I've ever heard. Is it just me, or do you begin to question someone's agenda when they come out with statements like that? It's worth remembering that these so-called financial experts get paid handsomely whether they are correct or not. Frightening really, and an excellent reason to manage your own investments.

Interestingly, it often makes me laugh when I hear traders say, "I'm taking money off the table and I'll start investing again when we reach the bottom of the market". How will they know when that happens? Is this a bear market or just a correction? If you thought a stock was good value a week ago and the news hasn't changed then why would you suddenly think it wasn't good value?

The reality is this. I'd guess some investors sell perfectly good stocks and then sit on their hands waiting for clear signs of a change in market direction that never arrives. Certainly in my investing lifetime, I've never recognised the onset of a bull or bear market phase until it's well advanced, and I've never seen anybody consistently get it right either, and that's with a 50-50 chance of being right or wrong. Most will probably revisit and buy back their shares when the price has already risen above the price they originally sold them for.

This is where I refer back to the Lynch and Buffet comments quoted earlier.

For what it's worth, I'd say the bull market has at least two more years to run before we suffer a significant setback. At least I've got a 50% chance of being right. With a ten year horizon however, I'm very confident that I'm right.

When is a loss a loss?

A rhetorical question. When is a loss a loss or a profit a profit? Answer: Not until you take it. Sorry if that sounds patronising but bear with me.

In 2002, I invested in a company called Ashtead, I was still a relative novice but I noticed that the company had considerable assets and that the market cap. was around or below the value of it's assets. What I hadn't quite grasped (through naivety) was the size of it's debt.

I originally bought shares for 30p. However, the company started to look like it was in trouble and about to break it's banking covenants. I watched as the price sank from my 30p purchase price to an intra-day low of around 1.5p.

However, the company survived chiefly because of it's assets and as the share price and confidence began to return, I bought again at 15p. The price rose and I felt so proud of myself having survived the experience that when my holding turned a small profit I sold my shares. Hurray.

Ashtead's share price today is £11.27. Even my original 30p purchase would have 37.5 bagged. My 15p purchase would have 75 bagged. Oops.

Make what you will of my anecdote, but it was an invaluable and chastening lesson for me. Catch a few of these companies in your investing lifetime and the rest of your portfolio becomes almost immaterial.