Sunday, December 04, 2005
Countrywide short starts to squeeze
In August I opened a spread-bet on Countrywide, the FTSE250-listed national estate agent. I bet, via a financial bookmaker that the company's shares would fall from their value at the time of 328p. Rather than fall, the shares rose steadily to almost 400p in September. The shares fell back slightly and I recently doubled my bet at 380p.
On Friday, Countrywide shares closed at 395p to buy, leaving me well out of the money and needing to provide my account with a capital injection.
With broker forecasts for the year at around 12p EPS, the shares trade at a very expensive price-to-earnings ratio around 31. That's too expensive for this type of cyclical business. Countrywide is in the first year of declining earnings and managed to make a meagre 1.8p per share in the first half of the year. Official statistics from the British Land Registry confirmed that property transactions in the third quarter of 2005 were 15% down on 2004's figures. Countrywide's area of operations continues to worsen. So why do brokers think the company will make five times as much in the second half of the year as they did in the first six months? And why have the shares continued to rise, despite the news in the market and the recent sales from their largest shareholder?
Those are academic points. Fact is, I will have to bolster my account tomorrow a.m. and I have got this one badly wrong so far.
The Artful Dodger
On Friday, Countrywide shares closed at 395p to buy, leaving me well out of the money and needing to provide my account with a capital injection.
With broker forecasts for the year at around 12p EPS, the shares trade at a very expensive price-to-earnings ratio around 31. That's too expensive for this type of cyclical business. Countrywide is in the first year of declining earnings and managed to make a meagre 1.8p per share in the first half of the year. Official statistics from the British Land Registry confirmed that property transactions in the third quarter of 2005 were 15% down on 2004's figures. Countrywide's area of operations continues to worsen. So why do brokers think the company will make five times as much in the second half of the year as they did in the first six months? And why have the shares continued to rise, despite the news in the market and the recent sales from their largest shareholder?
Those are academic points. Fact is, I will have to bolster my account tomorrow a.m. and I have got this one badly wrong so far.
The Artful Dodger
Comments:
Post a Comment
