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Inflation and investments #finance

Inflation is on the rise once again and stands at around 2.5% which means my return on my investment in Zopa has been cut substantially by the effect of inflation. The return has increased, it dropped to under 4% and is about 4.5% now. Even so, the return in real terms is now only about 2% but still better than a bank account! My point is that we should consider investments in the light of rising inflation and look at what returns are in real terms.

inflation eating away at savings and investments?

The FTSE 100

The FTSE 100 is at a record high but it seems to be fairly stagnant despite that. It needs to advance by more than 2.5% to give investors a real return. Attitudes to the European Union and Brexit are damaging and producing uncertainty. The government appears to be in favour of hard negotiation when it would be in our interests to have a policy of alignment with European policies wherever possible. Alignment can allow us to continue with the best of European legislation such as safety and rights while ditching open borders. Politics is always crazy by nature so we just have to put up with it and invest accordingly.

The AIM market

The AIM market is crazy by nature too. Solo Oil dropped even further this week to a bargain basement price and recovered slightly when they dropped their plan for further investment in Helium One. It wasn’t further investment that was objected to by investors but the fact it didn’t seem to be a good investment done with due diligence that worried investors. The main reason for the investor revolt was the thought of further dilution with an issue to another dodgy institutional investor who would get a big discount and then drip the shares back into the market and make easy money. If Solo wants a bigger slice of Helium One, do the due research and negotiate a good deal and then do a rights issue to raise the capital. I think in such circumstances a rights issue would be oversubscribed.

Pharma

I’m holding shares in two pharmaceutical companies and they both look very promising. Immupharma is developing a major drug for lupus and the technology shows promise for other diseases too. They jumped sharply north this week only to drop back the next day but overall the movement was positive as was Verona Pharma. I’m now making a profit on Immupharma and Verona is on break even. Verona Pharma consolidated at a ratio of 50 to 1 The share were 3p and they doubled to 6p and then dropped back to about 3p and then the consolidation. We could easily see then quickly double again but this time to 300p a share or possibly higher as major pharmaceuticals see this little pharmaceutical as a takeover target.

Lloyds

There is a lot written about Lloyds in the financial press. I have just had my dividend and the share price continues to recover. I am expecting the price to hit the £1 mark before the end of the year. The election result could influence that of course!

Premier Foods

I’ve held Premier Foods through thick and thin, mostly thin! They have done lots of good things but despite efforts to recover from the credit crunch of 2008 they still struggle weighed down by debt. They did try promoting Mr Kipling through social media but they really need to repackage Mr Kipling in more ways than one. The exceedingly good cakes slogan could work again. Nostalgia is enjoying a boom and they could take advantage of that. The packaging needs to go because it is being ripped off by lookalikes on the shelves of Aldi and own brands in the majors. What is needed is a TV advertising campaign with a real-life Mr Kipling. I actually know the perfect gentleman who is always making cakes! The cakes need to be improved too and send upmarket and off the shelves of Poundland. They need to get better prices for their cakes and now inflation is cutting into profits that need is critical.

Shareholders

Shareholders these days want a voice but hold shares through nominee accounts and have little communication with the company. The shareholder revolt this week that changed things at Solo Oil was a rare event. That was made possible by shareholder interaction on the forums. We need more than that, maybe social media for shareholders and we need direct ownership while keeping the advantages of online dealing. The stock exchange needs to change. Maybe Jeremy Corbyn could put it on his nationalisation list. A shareholding public, the means of production and service in the hands of the people? Now there’s a thought…

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