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Although I am sure your contribution is quite valid, I confess that I do not understand it at all.
Um… market capitalisation is a curious value determined by the assets owned, the revenue that is generated by those assets, the profits made from sales from owning assets and the dividends that are paid to shareholders. RIO is pretty cheap when compared with an absolute. The absolute I use is Price : Earnings. This is shortened to the PE Ratio.
Put another way, a PE of 10 means that for a 100% return, the dividends thrown off for 10 years is the cost to owning shares now. The lower the PE, the shorter the time that shares will need to be owned for for the dividends when aggregated to buy each shares and thus break even.
The PE for RIO is currently about 5. The average PE for constituent companies in the FTSE is around 15. RIO represents good value. I will continue to add to my holding until such time as RIO ceases to represent good value.
A few weeks after my last post and the SP has barely moved, yet the broader market has continued to fall. My perpetual optimism for long term outcome remains bullish. However, I think we are only into month 7 of a bear market.
Bear markets tend to last an average of 10 months. I suspect that this bear market will last another 6 moths as there is insufficient good (financial) news anywhere in the world.
Technical Analysis is not really an area where I have much experience but I do note that sometimes quite bullish signals are presented. One such signal is a Golden Cross....... This is where the 50 day and 200 day moving averages are rising and the 50 day MA crosses through the 200 day line.
BEG seems to be in contention to produce this signal during the next few weeks. Anyway, I was happy to buy shares in BEG when I did and find that this is one of the few holdings this year in my portfolio to be in positive territory.
Yes, I know I tend to drone on a bit but perspective is needed, especially for those that have never witnessed a recession or a serious downturn in markets. Well, 2022 started badly and has got a whole heap worse. There is probably a bit further for markets to fall before the bottom can be called but, for what it is worth, here is my advice as an old timer that began investing in 1979.
Sweat it out.
You know that the equities you hold had at the point of purchase the qualities to provide capital growth. (I ignore those investors that simply buy for income). Well, provided that your reasons to own the shares have not materially changed (despite share price changes), then hang onto them. Some of those equities may even have gained market capital, but most, I wager, will have fallen. The entire market has fallen, not just the UK, but in the US, Canada, China, Australia, Europe etc. There have been no hiding places.
So... what should we do? Well the first thing is not to panic and the second is to try and identify the sectors that are likely to recover first. As you won't (or should not) have exposure to a single sector or a single company, then there is a good chance that one or more of your holdings generate dividends. I've always taken my dividends as cash so that it allows me to invest where I want to apply my money.
I am not fussed about RIO as a minority shareholder; my stake will not move the price but it SHOULD reward me in the long term from the mining super-cycle that I believe we are in currently. The developed world is singing the praise of alternative energy but about 100% of these are still in development so not really for widows and orphans. My money is on recovery in Information technology and medicines, notably those that are from machine learning or artificial intelligence (AI).
Sorry to witter on; 2022 has been a statue year. Bear markets tend to last 10 months as an average so we are at month 7 or perhaps 8. And while "recession" has not been called by the weasel politicians, it most certainly is there and in plain view (again, my opinion). There is another 5 months pain ahead, I feel but I will be dripping capital back in a little ahead of the bottom because the past has a habit of repeating itself.
The history of bear markets is that they are brutal - most with 33% off, a few with 50% off highs and rarely 66% off highs - my hunch is that this will be a "normal" bear market with 33% off. Currently markets are off in the 20% - 25% range% and if they don't bounce strongly from the 30% territory, then there is another 10 months to wait for the 50% range to be cast. Recovery though tends to be VERY swift indeed with around 12 months to re-capture previous highs.
Trust your research. But be thorough in that process.
It is not just this week that has been harsh but 2022 has been very much a "statue" year. My portfolio (in common with most, I suspect) has taken a bit of a thrashing (off 23% as at this morning). But as my enthusiasm for my holdings has not changed, I will sweat things out (as I have done in past recessions in the 1970's, '80's, 90's etc).
My preference to be fully invested at all times has been set aside for this year. Dividends have swelled my cash reserves to 5% but I am not convinced that the market has reached the bottom. Once all the bad news has been fully priced in (the next news is confirmation that the UK is in recession), then and only then (IMO) will the market be able to regain composure.
Past bear markets tend to last about 10 months but the period after that is usually very profitable.
Not necessarily, Brass0. Dividend declarations are from profits and the managers may decide to vary the proportion that is distributed, reduce / increase the distribution or cancel the distribution. A high yield can ring warning bells, particularly if the share price is falling.
2022 has been an absolute shocker for many investors, myself included and there seems to be no shortfall in terms of gloom and worry. Safe havens? Well, I've not found anywhere to hide so it is really just a case of waiting for the bad news to come out.
Covid is largely finished - a few pockets here and there in the developed world, but is now compared with seasonal flu. The worries (as I see them) are inflation, recession and keeping a lid on the Balkans. Broadly, I believe that miners are in a super-cycle and my decision to buy shares in RIO roughly 18 months ago has my holding in profit. The adage of running profits seems sensible in such circumstance and to add to holding on the "statue" days. Inflation is usually transitory from "one off" occurrances. We have had rather too many "one off's" this year to suggest that inflation will be transitory and I am expecting it to reach 12% this year and drop to around 4% next. That should benefit bank shares as interest rates rise, but will "kill off" investment, particularly in major projects.
And the rise in interest rates, together with inflation has all the hallmarks of a recession. And I believe that the UK is already in such recession, although not formally announced, especially as the Courts have been opened up to evict rogue tenants. Recessions have the effect to cause poorly capitalised businesses to fail so have made a small investment in Begbie Traynor, the insolvency specialists.
Anyway, markets come back in time, they always do. I have always preferred to average UP and be 100% invested. I am currently sitting on 5% cash; this will be swollen over the next few months with dividends that are thrown off.
Added a few more on Wednesday, this time for elder son. Have a feeling that markets are going to be pretty poor for the remainder of the year. The huge discount for a mature trust under proven managers means that investors can be spoiled for entry points. I appreciate that I am probably wittering away to myself.
With the prospect of recession for UK almost a given, the OECD forecasting that the UK will have growth (contraction) poorer than most G20 countries, I believe I was correct in my decision to sell when I did.
Although board prices are rising, the demand for board is not, hence lead times reduced and bespoke cutters no longer working overtime.
Naturally, I am not a doomster, but I see no compelling reason to apply cash (and I am sitting on a greater %age now than at any time in the past) until all the bad news is priced in. There will always be little glimmers of good news, but the broad picture is for more stormy weather.
I like SMDS as a business. It is dull and necessary; just now (for me) not the correct time to invest again. Yes, I know my business is tiny and yes, I can take patronising and disparaging remarks from others with good grace, but I am interested in capital growth for my portfolio and at the moment, SMDS is not priced sufficiently attractively for me.
Delisting does not mean that shares in the company cease to have value. A market will always be available, though the price offered may not be either transparent or viable. The price immediately before technical suspension was 30p. Buyers might be rare to find on a matched bargain at 20p, but at 10p a few brave buyers will take a punt. At 5p even of there was no further information released, I wager that most institutional sellers would cut losses and cash in what remains of their holding.
The private punter tends either to capitulate far too late orjust hangs on for the inevitable….. an investment that is basiclly, worthless. For the very rich, not a problem as the loss can be applied against profits to reduce CGT, but SIPP or ISA holdings do not even have that benefit.
All in all, it is a sorry situation. We all pick lemons from time to time when building our wealth. I have NEVER held shares in DX and closed my business acount with DX for reasons given in previous posts.
There is advantage for institutional investors to hold shares in DX even if delisted as those holdings are effectively there is the good chance that the business will be subject to restructuring, change of executive greater participation from shareholder t board level with probable appointment of executive director and eventual relisting.
The great healer of all things is time.
FWIW, I have owned shares at one time or another in both LLOY and NWG. My portfolio has been constructed for growth and any dividend thrown off has been comsidered a bonus.
Weighing up the pros and cons for each equity for MY portfolio at a point when I had no exposure to UK banking sector, the balance fell in favour of NWG. I tend to review my portfolio every month and potential growth favours UK bank equities, I have begun to drip cash into NWG following an initial chunk of cash to have my target exposure of 1.5% portfolio by end of year in this equity and 3% exposure to sector. In cash terms my average “unit” that I buy is £10,000. I currently have 72 holdings in my portfolio plus cash. Cash held is generally under 0.5%, but at the moment am sitting on 2.1% cash.
With an absence of good news, markets will remain in a broad down trend I believe for the remainder of the year and although there might be a small rally during the year, my portfolio is expected the end the year -19%
Next year I believe will start badly but begin to improve from April and inflation begins to beb eliminated. That aside, recessions do happen and bear markets are savage. 2022 marked the startbof a bear market and there’s no sign of it ending this year.
fromage, as I am an optimist, FWIW, I think that your approach is sensible. The adage sell in May and go away is my sensible head telling me to sit on cash, ignore "inflation" and prepare for a savage bear market that might last a couple of years.
Picking re-entry points is tricky in bull markets but timing the bear ones is really tough. It has not helped in that I find myself now head of my family facing a substantial IHT bill with a falling market, rising interest rates and the prospect of a collapse in the housing market (which forms the bulk of the IHT bill). Oh well... nothing that a decent bottle of claret won't numb.
Well, I thought that todays statement was pretty upbeat.... and for a moment, so did Mr Market. But we are at the cusp of a recession in the UK, IMO, and, sticking my neck out a little further in the early stage of a bear market that started in February. My hunch is that the market will remain week for quite a few months, but it is not to say that there is gloom and despondency for the duration. I will be sitting on cash that is generated from my holdings and see no compelling reason to buy or sell until the market has gained composure.