Friday, September 28, 2007

Trading Update

The lesson I have learnt from the recent market correction is the importance of diversity in a portfolio.

My growth portfolio only has one bank and has US technology, US biotech and oil stocks. It has been relatively unaffected by the recent volatility. My mortgage portfolio on the other hand contains two banks and a UK real estate stock. It has been hammered by the correction, with the three stocks all down over 20%.

I hoped that owning a real estate stock would increase the diversity of the portfolio but British Land often seems to just follow the banks. Maybe it is because the current crisis concerns mortgages - leading to bad sentiment towards real estate.

Thankfully there have been two bright sparks in my mortgage portfolio - eBay and BHP Billiton.

The eBay share price has finally got some serious upwards momentum - heading for $40 for the first time in well over a year. The listing count is finally rising now that last year's pricing changes have been anniversaried and investors are relieved and able to focus on the other positives.

BLT has been going up all year. Analysts were plain wrong when they assumed that commodity prices would fall this year. Prices have gone up and taken BLT's share price with it.

My bank stocks will recover and I am looking forward to some nice dividends in October. But for the moment I am grateful for the limited diversity that I had.

Monday, September 17, 2007

Loaded and ready to fire

Well I am glad I resisted the temptation to buy into Northern Rock a few weeks ago. Hopefully I have gained some wisdom during my short investing life and I have been stung before by buying into companies soon after bad news is released, only to find out that the share price has so much further to fall.

Even on Friday I read on message boards about people buying into NRK as soon as the market opened to get a "bargain" only to see the share price fall throughout the day. In my opinion to buy into a company like NRK at this point you need to either be a trader or a real expert in the banking industry. I am neither so I will stay away.

I think a good way to play the current banking crisis is to buy into non-financial companies that have been unfairly sold off due to all the bad sentiment around.

In this vein I sold my remaining Google shares on Friday as I saw the CSR share price hovering above 600p. I have written about CSR recently and I think if it hits 600p there is a chance of a quick 10% when it recovers. I did actually put an order in for 250 CSR shares but the share price rose out of range as the American markets opened.

So I am now left with a loaded gun. I will try to be patient and wait for the right bargain to appear. And it will not be a bank!

Saturday, September 08, 2007

A taste of Apple

Hands up who bought into Apple in early 2003? I didn't think so. Nor did I. Apple's 1700% rise in less than 5 years is that sort of growth that investors dream about but rarely capture.
Is Apple still worth a look? Definitely, although it is not cheap. Apple just grew its revenue by 25% and Macintosh sales grew by 33%. Apple is on a 2008 PE of about 27.
The great thing about Apple compared to Microsoft is that they control the hardware and software of their products. While Microsoft are struggling to come up with compelling reasons for customers to upgrade to Windows Vista, Apple can make a new product desirable just by making the external design more attractive.
My only experience of Apple products is my iPod shuffle - the humblest product in Apple's lineup. However in terms of entertain per pound spent no product has given me more than my little iPod. Now that my music is in iTunes I am effectively locked in to using iPods as it would take a long and tedious effort to export my music library.
My opinion of the Shuffle is that it is a very well designed and produced product. If all Apple's products match it for quality than Apple should continue to gain market share.
The great thing about the Apple Mac is that it has less than 10% market share in the PC world so there is plenty of ground to be conquered. Microsoft and Dell should be very worried.
I like Apple but not at these prices. If the share price drops below $100 then I will look again.