Hi all
If you want to go straight to the links then just scroll down, otherwise I'd like to talk briefly about market noise.
One of the big movers this week was Prudential, where the shares were up about 12% in only a few days, adding more than £2 billion to the value of the company. It's kind of the anti-Tesco, where Tesco saw their shares drop by an incredibly 15% (about £4 billion) in just two or three days on the back of some bad like-for-like figures. In Prudential’s case, results came in above estimates and their Asian business became the dominant growth driver.
In one case some short-term bad news resulted in a 15% loss, while the other case had short-term good news resulting in a 12% gain. The point here is not whether or not these news items eventually lead to long lasting change (a permanent weakening of Tesco or a permanent strengthening of Prudential); the point is that the share price MOVED by such a large amount in such a short time.
This means that in the days before the news announcement, the market had no idea that this good or bad news was coming, which means that this news is not forecastable and not tradable.
If your time horizon is so short that you make buy or sell decisions based on this sort of news story, then your results are likely to be as random as the news that you are trading off of.
I’m sure that by now you know what I’m going to say.
The only way to take advantage of these short-term moves is to have an idea of a company’s intrinsic value based on long-term data on earnings, growth, dividends and stability/predictability.
You can see the full post on Prudential here
Last week I did a quick review of HSBC where I said it was a ‘C’ grade stock. Well, after reading it again and looking at the company I decided to upgrade it to a ‘B’ and add some additional detail to the post, including a 10 year price chart, and tables of 10 year earnings and dividend history and various valuation measures.
You can see the new and improved post on HSBC here
Another company I have reviewed recently is Facebook. I was asked by the nice people at Nutmeg (an online investment manager) to pen a piece about the social media giant. I did warn then that it was likely to be bearish, given that I look at long-term fundamentals and Facebook has none. They said do it anyway.
So, you can see my article on Facebook here
Not content with that, I also penned an introduction to investing for the BullBearings site, which has a well know stock market simulation to allow virtual trading and private trading competitions. The article covers investing for the long-term, diversification and asset allocation.
You can see the full article on BullBearings.co.uk here
Another event of the last week or so was the launch of Stockopedia PRO, which has been in beta testing for some time. It’s a pretty nifty stock screener and information tool which runs alongside the community which has built up there over the last year or two.
And that's about it for this week. If you've seen something that was particularly interesting and think I should have included it, or if you want to ask me something, then you can reply to this email and I'll rely as soon as possible.
Also, if you're interested in large-cap income and growth then I'm still running the 60-day free trial of my newsletter, the Defensive Value Report. You can sign up for the free trial here.
Have a nice weekend,
John
