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Blitz, Bust or Boom? Investing for Growth
Thursday 28th October 2010
Redmayne Bentley's Senior strategist, Allan Collins, started off the event with a brief introduction to Redmayne Bentley, and the history behind October Investment Month, which has been running for some 20 years! Apparently October is the start of the "investing season" with almost 70% of Redmayne's client investments being made up until April, when it all goes quiet.
How to pick and profit from high risk stocksRuss Mould
Russ Mould is the current editor at Shares magazine, and has over 19 years experience as an equity analyst (previously with SG Warburg, covering the technology sector).
Russ outlined the various levels of risk you can take when investing your money – bonds being "in theory" the lowest risk option but with an annual yield of only 3% and very high risk stocks (such as technology and mining) being at the other end of the spectrum with an anticipated yield of around 21%. The point being that the more risk you take with your money the higher return you should expect to compensate for that risk – although obviously it doesn't always work out that way.
Despite this relatively simple explanation of risk, Russ made it clear that in his opinion, bonds were in fact the high risk investment – with their yield barely keeping up with inflation – and equities in the current market were the low risk option - in particular Russ mentioned Asos.
10 Reasons to Buy Equities
- Equities are cheap on an earnings basis
- Equities are cheap on a yield basis relative to bonds
- Merger and acquisitions
- Corporations are cash rich
- Corporate capital expenditure is at multi-year lows
- There will not be a double-dip
- Inflation is coming
- Emerging market growth
- Deficits are cyclical, not structural
- Equities are the contrarian call
How to pick your high risk stocks
Russ went on to speak about the good and bad signs to look for when picking high risk stocks, how creating a large portfolio was very important with a high risk strategy – the idea being that you only need one stock out of ten to be a success and you will make a worthwhile return.
Key signs to watch
Russ Mould finished up with some questions from the audience – these ranged from global markets to US politics – giving Russ the chance to show off his extensive knowledge of world markets and economies and also to slip in a mention of Samsung Electronics – a company Russ apparently quite likes.
Investing in Dynamic Growth SharesMark Slater
Mark Slater (Head of Slater Investments Limited) took over from Russ to give a slightly different strategy for investing in high risk stocks.
Mark Slater runs several very successful investment funds – three of which are in the top 4 in the UK All Companies Sector Funds.
Mark's ethos was based around the principle that any investment strategy needs a backbone – a sensible and logical set of reasoning behind the stocks that you pick.
Mark gave a brief insight into the methodology that he uses for picking stocks and the key points that he looks for in each company before he will invest:
- PEG ratio - Price/Earnings To Growth ratio.
- Cash flow – this is imperative: if the company doesn't have a good cash flow then stay away.
- Actual performance - How the company is actually performing now – whether they have a competitive edge, pricing power, are they sustainable? Are the directors buying?
Mark gave some examples of companies that met all these criteria – Cape Oil and Gas being a notable one.
Mark went on to point out that no matter how extensively you research a company, there are still risks involved. But as he said, "the biggest risk is not taking any risk" – which seems very apt.
Sometimes though, a stock can turn out to be quite the opposite to what you were expecting, in this situation the key is realising that you've made a mistake (and correcting it as quickly as possible, even if that means cutting your losses). Conversely, Mark pointed out, when you have a stock performing well it is important to run the profits for as long as you can.
Mark highlighted Domino's Pizza as being a company that ticked all the boxes to fit into this strategy.
Mark Slater went on to take questions from the audience, shortly followed by drinks and a chance for everyone to discuss proceedings.
Well deserved thanks
We would like to thank Redmayne for the invitation to this seminar. Also for their hospitality; the canapés and wine were most welcome. All in all a very enjoyable and educational evening.