Thursday, June 02, 2005
Doubling up with Fayrewood
Yesterday I took the bold decision to sell my entire holding in Mayborn Group to double my exposure to Fayrewood. Mayborn is a fantastic company and remains undervalued - but it's not as cheap as Fayrewood. By my reckoning, Mayborn was at around an 8% discount to fair value. I measure Fayrewood's worth around 43% higher than the price the shares were trading at yesterday when I bought more at 111.5p.
An old stock market adage: buy it right and hold tight. I've got Fayrewood at an excruciatingly cheap price. But there's plenty of reasons holders were scared into selling all the way down to 110p. A number of Fayrewood's peers and competitors have warned on profits in recent months, the market is clearly expecting bad news at some point from Fayrewood. If Fayrewood can maintain the solid trading it reported at the AGM stage, with time these fears will evaporate - the shares should grind their way higher towards fair value.
It seems sad to see Mayborn go. Since my purchase in March of last year, the shares have returned over 50% - just the kind of return I like to see from my investments. But the possibility of further advances had started to look limited. Don't fool yourself into thinking there can be such a thing as loyalty in investment. Funds should always be positioned for optimal returns.
Ben Bailey and Dana Petroleum have also perked up since my last update but are still a long way from being sold. June is shaping up to be another very profitable month.
Let's see how it unwinds.
The Artful Dodger
An old stock market adage: buy it right and hold tight. I've got Fayrewood at an excruciatingly cheap price. But there's plenty of reasons holders were scared into selling all the way down to 110p. A number of Fayrewood's peers and competitors have warned on profits in recent months, the market is clearly expecting bad news at some point from Fayrewood. If Fayrewood can maintain the solid trading it reported at the AGM stage, with time these fears will evaporate - the shares should grind their way higher towards fair value.
It seems sad to see Mayborn go. Since my purchase in March of last year, the shares have returned over 50% - just the kind of return I like to see from my investments. But the possibility of further advances had started to look limited. Don't fool yourself into thinking there can be such a thing as loyalty in investment. Funds should always be positioned for optimal returns.
Ben Bailey and Dana Petroleum have also perked up since my last update but are still a long way from being sold. June is shaping up to be another very profitable month.
Let's see how it unwinds.
The Artful Dodger
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