The Best of Last Week – Stagecoach
By John Kingham on 12 Dec 2011 12:06 pm in Company Analysis, Stagecoach Stagecoach released their interim report last week and were the highest ranked stock on my short list to do so. The question is, at a price of around 250p, what do the shares of this company have to offer the average investor? The first think to note is that in the past the company has provided a stable base of earnings. This stable earnings power comes primarily from the industry in which they operate. By providing public transport on their fleet of buses and trains the company's earnings are generated from many millions of frequent and often non-discretionary cash payments. Even during recessions people have to travel. The same is true of their competitors, including FirstGroup and Go-Ahead. The average earnings of the past decade are around 13.5p per share, which means the current price is around 19 times that level (also known as the Graham and Dodd PE or PE10). There is however, more to being a good company than simply generating stable earnings and Stagecoach has done more by growing at over 11% a year for many years. Although growth is not a prerequisite for a sound investment it is certainly better to own a growing company than one which [...]
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Why Stock Tickers Are Bad For Your Wealth
By John Kingham on 08 Dec 2011 08:55 am in Value Investing Having share prices in your face 24/7 is like having a giant red sign on top of your house constantly flashing the price that everyone else (on average) thinks your house is worth. Do you want grey hair? Just go outside and watch the price on that sign as it ticks up and down by hundreds, if not thousands of pounds every day. Like the future, the news and people's opinions, that price would move around essentially at random and often to an alarming degree. Share price gazing can be hazardous to your wealth Imagine you're a buy-to-let landlord and you've picked up a nice house for £500,000 cash. The tenants pay £2,000 a month to give you a more or less 5% income. The reason you chose to invest in property as opposed to the much easier bond route is because you expect both the income and the capital value to go up more or less with inflation while bond coupons are fixed, which sounds sensible enough. You'd wake up one morning a year later and the sign is flashing: £550,000! Great, it's up 10k in a year, just what you expected and then some. Add in the rental [...]
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