Artful Investing

Shopping in the Sales

It's not just high street retailers that deeply discount to attract custom, the stock market does too. As the shops are desperate to clear out their wooly jumpers come spring, speculators get desperate to offload holdings at very attractive prices when they feel a change in the air.

Last week's comment from Mervyn King, governor of the Bank of England, that house prices can go down as well as up, caused panic among investors in the sector. Falling house prices would choke profits, would likely persist for several years and could bankrupt some companies. When share prices fall away significantly the investor must discover what has so seriously spooked shareholders. Are the falls unique to my investment or common with the rest of the sector and market? What newsflow has precipitated the commotion?

Ben Bailey shares fell below 400p. From the May 7th AGM statement, the company is enjoying strong trading. I reckon house prices in Ben Bailey's area less vulnerable than the part of the market Mr King's comments were aimed at, the overheated south-east of England. With interim results expected early August, I took advantage of the stock market sales and bought 890 more Ben Bailey shares at 390p.

The Dana Petroleum annual general meeting last Tuesday yielded no more information on the company's progress. Companies often choose to release a trading statement on these occasions. In 2003, Dana made a comprehensive report of prospects and plans. Rumour has it a statement will follow soon.

Chaucer however, cheered the market with their AGM statement yesterday:

The 2004 year of account has started positively with total gross written premiums ahead of the same stage for 2003 and with pricing remaining strong overall.

...

A continuance of the current positive trading conditions, combined with the further development of business written under similar circumstances in 2002 and 2003, should, on the basis of average claims frequency, produce another strong underwriting result for Chaucer in 2004.'

...

'I am delighted with Chaucer's continued progress. The year has started well from an underwriting perspective, with premium prices and volumes on target.'

I'm confident my 66p price target for Chaucer will be achieved and similarly 520p for Ben Bailey. But how long must I wait?

The Artful Dodger