Wednesday, September 14, 2005
Ben Bailey: all out for 375p
For anyone that might be using Google's excellent new blog search service, I'd like to point out this is the investment record of a private investor into UK stocks, shares, equities and associated chattels.
Yesterday I took advantage of the depressed share prices in the insurance sector to buy more shares in insurer SVB. My remaining stake in housebuilder Ben Bailey was sold for 375p, a 15p per share loss since my purchase at 390p in June 2004, the proceeds and any cash balance were recycled into the increased SVB position at 26.75p.
Prospects for the housebuilding industry have progressively been turning less attractive but clear signs of trouble presented themselves in the interim results. Ben Bailey announced a 22% increase in turnover but a shocking 19% fall in profit before tax. Falling margins in a cyclical industry are the investment equivalent of blood trickling out of the edge of your mouth and form a central plank in my decision to take the loss and invest elsewhere.
So why didn't I sell Ben Bailey sooner?
Because the shares were still cheap. But a flurry of negative reports from the rest of the sector in the past week have helped convince me the market Bailey operates in has become less and less profitable. If Bailey struggled to maintain profit margins in the first six months of 2005 I can't see how it can manage to avoid anything much worse for the rest of the year.
The downside of this action is my portfolio now looks horribly concentrated. I am now left with only four positions, stakes in insurers SVB and Chaucer form approximately one third of my portfolio and Dana Petroleum and Fayrewood make up the rest. There is one more position I'll have to confess to however. Outside the portfolio (to prevent confusing the return calculation) I have opened a £20 a point short position in Countrywide, the estate agency chain. I expect another profit warning from this company before the year is out and if one is announced, I'll be crying all the way to the bank.
The Artful Dodger
Yesterday I took advantage of the depressed share prices in the insurance sector to buy more shares in insurer SVB. My remaining stake in housebuilder Ben Bailey was sold for 375p, a 15p per share loss since my purchase at 390p in June 2004, the proceeds and any cash balance were recycled into the increased SVB position at 26.75p.
Prospects for the housebuilding industry have progressively been turning less attractive but clear signs of trouble presented themselves in the interim results. Ben Bailey announced a 22% increase in turnover but a shocking 19% fall in profit before tax. Falling margins in a cyclical industry are the investment equivalent of blood trickling out of the edge of your mouth and form a central plank in my decision to take the loss and invest elsewhere.
So why didn't I sell Ben Bailey sooner?
Because the shares were still cheap. But a flurry of negative reports from the rest of the sector in the past week have helped convince me the market Bailey operates in has become less and less profitable. If Bailey struggled to maintain profit margins in the first six months of 2005 I can't see how it can manage to avoid anything much worse for the rest of the year.
The downside of this action is my portfolio now looks horribly concentrated. I am now left with only four positions, stakes in insurers SVB and Chaucer form approximately one third of my portfolio and Dana Petroleum and Fayrewood make up the rest. There is one more position I'll have to confess to however. Outside the portfolio (to prevent confusing the return calculation) I have opened a £20 a point short position in Countrywide, the estate agency chain. I expect another profit warning from this company before the year is out and if one is announced, I'll be crying all the way to the bank.
The Artful Dodger
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