Finance Friday: Contrarian investments
Investing in companies that have problems or that are making a loss is contrary to normal wisdom, but the returns often justify the risk. I bought Lloyds Banking Group for just under 30p and today they are just under 80p. That is about as good as it gets. Or is it? I could do better on Solo Oil.
The price of my shares in Solo Oil halved as we waited for good news. Last month the CEO bought a substantial amount of shares and the good news keeps coming, doubling the price of the shares. I’m now making a small profit, in theory. You never actually make a profit until you sell of course and the price can drop just as quickly as it can go up. I think Solo Oil has a lot of potential. If you price doubles just on a little good news, gushing oil could mean a bonanza for investors willing to take a big risk.
I am considering the TSB float. I think the TSB could be a good bank, they have fewer branches now and the future is largely internet and mobile banking. I think ‘mini banking halls’ in supermarkets and shopping centres is the future too. People will still need to talk to bankers about loans and other products so why not share premises? I already have Lloyds and RBS and so I don’t want more banking, but I am considering selling RBS in favour of TSB.
I have considered selling RSA too, but many brokers are now expecting RSA to finally make some progress. I only bought the shares in March so I think I’ll be patient a while longer. I’m about 10% up so far, which is a reasonable return.
Deciding to invest
I don’t write about what I’m buying because I don’t make the final decision until seconds before I buy. I am looking to buy today so will be watching movements carefully. I have a theory that the London Stock Market does better when the sun is shining in London. Perhaps the traders get SAD in the city! Here in the Black Country it’s sunshine and cloud… I’m feeling quite positive and have some cash in my account to invest. My decision is difficult because once again it’s contrary to popular opinion. I’m looking at loss makers.
What do you think? Do you invest in loss makers? Please use the box below to comment. You can also follow me on Twitter.