Friday, October 08, 2004
Keeping faith with Chaucer
Chaucer Holdings, the Lloyd's insurer and previously my second-largest portfolio holding has been a big disappointment in 2004. The company's share price has meandered and malingered, from 47p in January up to 53p in April and this week was as low as 40p. 2004 has been as infuriating as a long journey stuck behind a caravan watching other possible investments speed by and rise out of reach.
My lacklustre portfolio performance has been exacerbated by the impulsive and ultimately rash decision to buy more shares at 54.75p in April: the very high for year. At each portfolio review the record of 4075 additional Chaucer shares sneers at me for my lack of self-discipline, like the empty bottle by the bed that was last night's 'one too many'.
The frustration has been made more acute still by the positive newsflow up until the hurricane season. August's syndicate forecasts revealed good trading conditions and the expectation of another strong underwriting result for Chaucer in 2004. Though these expectations have since been dashed by the extreme hurricane frequency in the Atlantic, with 41.9p of tangible assets and still operating profitably it would have been illogical to have sold at this week's lows.
Though Chaucer's failure to reap any profits smarts I am convinced the shares remain undervalued and I refuse to sell an undervalued share - this is one of the central tenets of my investment strategy.
Do not sell cheap shares.
In One Up on Wall Street Peter Lynch denounces 'pulling up flowers', the common pitfall of pruning good investments from a portfolio:
A price drop in a good stock is only a tragedy if you sell at that price and never buy more. To me, a price drop is an opportunity to load up on bargains from among your worst performers and your laggards that show promise
I calculate Chaucer, measured alongside it's Lloyd's peers, is worth 64p. A sale at 40p would stop the losses from this investment but would be as rash and ill-conceived as my April purchase at 54.75p. Selling would be a desperate lunge to plug a leak in the portfolio - it may bring psychological and financial closure but it would be an immature and petulant response to price weakness.
Today's recovery to 42p to sell was most welcome and naturally I hope Chaucer can return to it's pre-hurricane high. Recovery could indeed continue right up to fair value, investments sometimes need a external shock for the market to reevaluate the trades being offered.
The Artful Dodger
My lacklustre portfolio performance has been exacerbated by the impulsive and ultimately rash decision to buy more shares at 54.75p in April: the very high for year. At each portfolio review the record of 4075 additional Chaucer shares sneers at me for my lack of self-discipline, like the empty bottle by the bed that was last night's 'one too many'.
The frustration has been made more acute still by the positive newsflow up until the hurricane season. August's syndicate forecasts revealed good trading conditions and the expectation of another strong underwriting result for Chaucer in 2004. Though these expectations have since been dashed by the extreme hurricane frequency in the Atlantic, with 41.9p of tangible assets and still operating profitably it would have been illogical to have sold at this week's lows.
Though Chaucer's failure to reap any profits smarts I am convinced the shares remain undervalued and I refuse to sell an undervalued share - this is one of the central tenets of my investment strategy.
Do not sell cheap shares.
In One Up on Wall Street Peter Lynch denounces 'pulling up flowers', the common pitfall of pruning good investments from a portfolio:
A price drop in a good stock is only a tragedy if you sell at that price and never buy more. To me, a price drop is an opportunity to load up on bargains from among your worst performers and your laggards that show promise
I calculate Chaucer, measured alongside it's Lloyd's peers, is worth 64p. A sale at 40p would stop the losses from this investment but would be as rash and ill-conceived as my April purchase at 54.75p. Selling would be a desperate lunge to plug a leak in the portfolio - it may bring psychological and financial closure but it would be an immature and petulant response to price weakness.
Today's recovery to 42p to sell was most welcome and naturally I hope Chaucer can return to it's pre-hurricane high. Recovery could indeed continue right up to fair value, investments sometimes need a external shock for the market to reevaluate the trades being offered.
The Artful Dodger
Comments:
Post a Comment
