Defensive Buying - Week Ending 30 December 2016

Wednesday, 4th January 2017 11:07 - 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!

 

Alongside the Defensive Buy list I will provide real examples of recent wins using my defensive buy strategy in AIM and FTSE companies. Today’s example is Glaxosmithkline (GSK).

This was the first time I invested in GSK so I decided to risk a small amount just so that I could get used to how GSK moves and become more familiar with the intraday charts. Before buying I checked the daily RSI and noticed it has been lurking in oversold territory for a long time and GSK has recently given some positive news flow and the company is profitable and dividend-paying so I felt there were enough reasons for other people to notice GSK once (if!) it started going up. Briefly, here are the details of the defensive investment:

Bought: 39 shares GSK (in 2 tranches)

Total cost of purchase: £593.31

Return after selling cost: £602.07

Return on investment: 1.47%

Incubation time: 15 days

For a first attempt using my defensive buying strategy in a FTSE 100 listed company, I was happy with this return and I felt comfortable with how GSK moves within a technical short term uptrend and this rise was aided by positive news flow which appeared during the cycle too. The size of the profit might only be just over £8 but 1.47% return in 15 days is better than banks these days and if you’ve only got less than a £1000 to invest, then it certainly shows that you can make your money work for you if you invest smartly by taking into account the fundamental and technical aspects determining entry.

 

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.