My Investment Journey Part 2 by Stock Whittler (@dosh100)

Well, the first steps in my investment journey had really gone well with the easy stuff of buying shares in the utility company I worked for. I had also branched out just a tad, and bought into some investment trusts run by Edinburgh fund managers and that gave me a buzz in terms of doing something a little more myself rather than just taking the safe pickings from utility flotations. The next logical step of the journey was, of course, to really become a big boy and buy some shares in individual companies but how would I select them. Possibly via tips in newspapers or via tip sheets. In the end, it was a combination of tip sheet and the papers with the first purchase being a house-builder that was rapidly acquired by a larger player for a premium; nice, I thought!
I started to read a  penny share tip sheet that suggested two really hot companies to get into were Azur; a ladies fashion company and also the British Taxpayers Association; both traded on the OFEX market. The write up for each seemed to be very convincing and the fact that you needed to subscribe to the penny share publication to obtain these privileged hot tips, gave me the confidence to buy both. I was naive of course and the collective investment soon proved to be a bit of a disaster; I learnt that such very junior markets were not for me: lots of promise of jam tomorrow but as my old granny used to tell me, “tomorrow may never come”.

Bound just to be a temporary setback I convinced myself and boldly strode onwards. With just basic research of the Helphire prospectus and the confidence of reading in the press the high regard of the management of the business, one the first day of trading in late 1997 I purchased some Helphire shares. Within a few weeks, I was handsomely in profit; this share price just kept going up and up; obviously one for me to hold onto; no intention of selling these boys quickly!

Some of my colleagues at Anglian Water, flushed with the success of AW share ownership,  were also becoming impatient  to dip their toe into the stock market pool and decided it would be a good idea to form an investment club. Our meetings were held in a pub in Cambridge: it was rather nice and very social. The format was for at least one potential purchase to be nominated, followed by a discussion of merits and voting. For our first purchase, I nominated Helphire, telling the group of my very wise decision to buy and boasting that I was already 20% up on the deal. My powers of persuasion came to little as the vote, went in favour of the nomination of a wiser sage within the club who had been investing for many years. Our sage wanted us to stay local within Cambridge and buy shares in Ionica a telecommunications company in Cambridge. The club was good fun but after Ionica, despite our unrelenting loyalty and refusing to sell, went bust, the investment club became less active. The investment club continued for a couple of years but the realisation to some members that they may actually lose money severely dampened their enthusiasm for the venture.

Undaunted and possibly bolstered by my already growing experience of share success and failure, I confidently continued on my investment journey.  I say confidently, although I was honest enough with myself to realise that the dramatic Helphire success, which by this time had trebled in value, owed much more to luck than my prowess as a stock picker: of course, when I did regale the story of my success, it was all down to my smart decision making. I decided I really needed to build my knowledge on what may make a good investable company over a poor company. I continued with various tip sheet publications: The Analyst, Technivest, Quantum Leap and others came within my radar but I never really felt comfortable with either their reasoning or that fact that the share price was usually up by about 15% directly on the Monday morning following publication. I continued to plough through newspapers and then stumbled upon a couple of columnists that struck the right note with me: Jim Slater writing in the Mail on Sunday and Paul Kavanagh in the Sunday Times. I did not realise it at the time but  these two guys would have a considerable impact on my investment journey as we headed towards the turn of the century.

I was becoming very impressed with the work of Jim Slater and bought his incredibly well-written book “The Zulu Principle”. The reasoning within the book was to my mind so very sound, understandable and convincing. Within my salaried employment I was managing a budget of £10 million pounds and dealing with accountants on a very frequent basis and maybe my confidence with financial budgets made the book all the more appealing. Jim mentioned such sensible things as a reasonable valuation for the expectation of future growth in earnings, the relative strength of the share price, the non fudging of profits and returns on capital: all aspects that would become hard coded within my thinking.

Following Jim’s well-reasoned guidance and understanding a little more of the financial criteria, I bought another two stocks: Blacks Leisure and DCS. Both of these stocks rapidly began to motor and I was a very happy investor. Wow, this was really good stuff and as I was feeling absolutely fabulous, I bought another growth stock; Harvey Nichols. Unfortunately, Harvey Nichols failed to move in my favour but the good point was that I was rapidly developing the realisation that even with reasoned share selection, it’s the performance of the collective basket of shares in your portfolio that determines joy or sorrow.

My thirst for knowledge started to take up more and more of my time as I read various investment books including What works on Wall Street, Beating the Dow but I was so impressed with Jim Slater’s works that I followed up his association with Company REFS and took out a subscription. At the time the publication consisted of the equivalent of a couple or more telephone directory size catalogues; they were heavy beasts as they mounted up and pre-computing took a massive amount of time to sort. The good thing was, however, that absolutely superb financial data had become available to joe public but at a cost. So for me, the post service became a source of not only data but the contract notes for my share trading. The trading commissions themselves could easily eat a hole in your portfolio value as at least one broker I was using at the time had a charge of £45 per transaction; nothing like the £5 for any amount that we are spoilt with today.

I started to attend various meetings & lectures in London, particularly ones involving lucky Jim; they were really so informative. I also remember attending one hosted by the owner of the Analyst tip sheet where it was explained to the audience that JJB sports was a share that you should plan to hold for life; although I held JJB at the time, I found the “hold for life part” a touch difficult to follow.

The internet was now coming of age but to get on-line at work back in 1997 was something of a challenge: whatever did the directors think we were going to do with such access. It became clear that I needed to buy my own PC for home use and I invested £2000 in a start of the art 4GB hard drive, 64mb RAM monster with a 15-inch screen; now we are flying with my dial-up internet connection!

This was my first PC since a Sinclair ZX Spectrum, heavens I hated that thing! Now getting online; wow was I lucky, all of this information on free bulletin boards written by people who were obviously in the know yet willing to share their wealth of knowledge to all: welcome to the world of ramping.

Overall I was a happy chap, I was learning all the time about share selection and making money. I used to have many coffee break discussions with Gordon who had the contract to maintain the power facilities in the labs. Gordon was a very keen investor but each coffee conversation started with his cursing of Adil Nadir and Polly Peck; Gordon had suffered a particularly bad experience in that area. Anyway, on this particular morning, Gordon said “my broker has been trying to push me in the direction of Fibrenet, reckons technology is the next hot thing”, “what do you think Bill”?

Hmm now there is a thought; the journey continues!

 

Article written by @dosh100

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