Defensive Buying - Week Ending 10 February 2017

Monday, 13th February 2017 16:08 - by Moosh

The number of shares in a defensive buy is dictated primarily by the asking price and the buy/sell commission that you pay – for simplification I will assume that the buy and sell commissions are the same value and will provide a maximum number of shares to buy for a single commission of £5.25, £7.50, £10.00, and £12.00.

If your commission is not shown here, then round up to the nearest commission level and use that as a potential maximum number of shares to buy, assuming you are happy with the fundamentals at the latest time and price given. I will be adding more companies to the Defensive Buy list when they are ready to appear on it and NOT before!

This first example of a defensive buy is PLUS500 (PLUS). The price of PLUS dropped sharply at the end of 2016 and it meant the PE ratio was well below 10. The company is profitable and pays a large dividend and has a huge amount of cash. The results were coming up and they turned out to be fantastic so this was a good defensive buy example:

Bought: 200 shares PLUS (1 tranche)

Total cost of purchase: £814.65

Return after selling cost: £932.80

Return on investment: 14.5%

Incubation time: 26 days

The second defensive buy example is Direct Line Insurance (DLG) – it is the first time I invested in this so I wanted to get used to how it moves. It is profitable and dividend paying:

Bought: 150 shares DLG (1 tranche)

Total cost of purchase: £532.01

Return after selling cost: £539.78

Return on investment: 1.46%

Incubation time: 27 days

Total profit from defensive buys (rounded down to nearest pound):

£8 (GSK) +£7 (BT.A) +£50 (ARS) +£4 (OMI) +£81 (ARS) +£20 (OXP) +£6 (ARS) +£118 (PLUS) +£7(DLG) = £301

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.