Finance Friday: assessing investment risks
There are lots of different types of investment. Property seems to appear safe in the UK as a variety of factors limit supply and stimulate demand. Many people are making their fortunes by leveraging their property portfolios and buying more and more property to let in a market where rents are inflated.
There is a view that investors don’t deserve to make money, ‘for doing nothing’, but the money to set up new businesses and so on, has to come from somewhere and investors are willing to take a risk. The latest technology to be ‘in fashion’ is graphene. It’s an interesting material and Graphene Nanochem are leaders in its production. They announced new patents on their technology yesterday sending their share price up 20% in a few hours. It could have easily gone the other way. I’m still making a loss on my shares, but that jump cut the loss in half, so I’m still optimistic that I’ll get a return on that investment. The company has won a few new orders too, more orders will help the share price to recover to previous highs.
A director bought shares in Premier Foods again yesterday, suggesting they have confidence in the recovery of one of Britain’s biggest food companies. They have begun advertising their products again and using social media. The products do better in winter and a hot summer is depressing sales of many core products. They have been pushing Mr Kipling products, but the Autumn should see a rise in sales for other core brands and a rise in the share price. At 40p, the share price must be at rock bottom now. The deeply discounted shares that investors bought as part of the rights issue were 50p. Those shares increased my average price to just over 46p, so I’m running a paper loss now. It seems incredible that the share price has dropped back to the same as I bought at in 2011. They went up to 186p when the company was deep in debt and had problems with Tesco cancelling their contract. Many debts have been paid off using the cash from the rights issue, so why is the share price so low? Maybe it’s just a lack of confidence on the part of investors and a market that is nervous.
With tensions in Ukraine and the Middle East, the markets have been down for months. Investors seem to be less willing to take risks and go for investments that appear to be ‘safe havens’. When traders see things a little more positively, these shares might appear very cheap and then we will see a scramble to buy.
We also have political uncertainty with a general election in the UK in less than a year. Even the referendum in Scotland is unnerving some investors. The value of the pound is high and while this helps to keep the price of imported energy, oil and food down; it is making things difficult for exporters. The economic miracle promised by government isn’t happening. We can’t wait for the grandiose investment projects like HS2, we need new housing as soon as possible. Too much money is going into fuelling a south east housing bubble.
What do you think? How do you see the UK economy going? Is it recovering? Please share your thoughts in the comments box. You can also follow me on Twitter.