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Investments: Royal Sun Alliance (RSA)

I usually do an investment post when I make a new investment on the stock market. On my watch-list for some time has been the troubled insurance group, Royal Sun Alliance. I had a discount on dealing fees on Wednesday, so I decided to buy.

If you’re a regular reader you’ll know I’m building a portfolio and like companies that are in need of financial restructuring. RSA are planning a rights issue to try to pay off the debts and get the company back on a even keel.

Premier Foods

I found that Premier Foods was also going ahead with it rights issue this week, after I had bought RSA. That rights issue is 8 new shares at 50p for every 5 that are already owned. That will dilute the value of existing shares and the initial reaction was to send Premier Foods shares down, but then everyone wanted in on the action and they went up yesterday to 157p. They were at a high of 186p last year before the results for the summer came out. I expect the price to drop with this rights issue, but I think they will still be well over a pound a share. I intend to exercise my right to buy the new shares at 50p each. It will unbalance the portfolio a little; it’s better to be diverse, but I’ll remedy that in the long term.

This is my first rights issue as an investor and so I’m finding it rewarding in more ways than one to see how it pans out. I bought my shares at just 4p before the  10 for 1 share swap. Today’s price is 155.5p (bid price) and so I’ve nearly quadrupled my investment.

Last year

You might have read the posts I wrote last year when I bought Solo Oil and Taylor Wimpey. The former is losing me money and the latter is 20% up. I think Solo Oil is a risky investment, but if they strike oil (or gas), then it’s a different story. They have interests in drilling in a few places. The seismic surveys in Tanzania look interesting and drilling will start in Surrey soon. I think Solo could turn out to be a good investment if I hang on to the summer. At the moment it’s about 35% down.

Royal Mail

Like many other people, I also bought Royal Mail Group last year and had the allocation of 227 shares. They are currently 593p, but have been over 600p a share. I expect them to go higher and those shares will pay a dividend of around £30 in July. I don’t expect them to go much higher than 600p though. They cost 330p a share and so that’s a good return.

Savings

An analysis of bank accounts some time ago, showed that the average household in the UK has savings of just £2,500. That includes saving for bills, new household furniture and appliances and a replacement for the car. Compared to average incomes of £25,000, people aren’t saving very much and investing even less. You can invest in a stocks and shares ISA and get a much better return than in the bank. Shop around though, some have low dealing fees, but a monthly ISA fee, others have a higher dealing fee but a low annual ISA fee. I use Halifax Share dealing, which is about to increase it’s dealing fee, but does have special days when the dealing fee is just 3.95. I only paid 3.95 this week to buy RSA.

Disclaimer

Obviously the information in this post is not financial advice. I just tell you what I’m doing, I don’t expect you to be crazy enough to do the same! It is however food for thought. I do have a little fun playing the stock market, writing, reviewing art exhibitions, taking photographs and trying to create art. My blog posts aim to inform, entertain and amuse.

What do you think? Please post your tips and thoughts in the comments box. You can also follow me on Twitter.

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