price value money
The value of money used to be determined by the gold standard. Now we have ‘fiat’ money, value seems to be determined by confidence and sentiment. The way the global economy works seems so strange to me. The price of things we are told is determined by supply and demand.
The global economy has been in a mess since the 2007 ‘credit crunch. Sorry, am I boring you? Yes, economics can be boring so I’ll tell you a story instead. This is part of a WordPress post a day challenge. The one word daily prompt yesterday was price. I know that was yesterday’s prompt but I don’t see the prompt until the afternoon and I write in the morning so I’m doing it today.
The 2007 credit crunch got me thinking about investments and looking for things to invest in. Zopa was a good choice in 2011 and has given me a good return through their peer to peer lending platform. My story today though is about investing in losers in the stock market. My first investment was very bad and I didn’t do enough research. I lost the lot!
Lloyds and Premier Foods
Remember the banks being bailed out by the government? The price of Lloyds shares went down to 30p. That was the price I bought at in 2011, it was a calculated risk but it paid off and I sold a few years later at 80p. Strangely enough, I have bought back in recently at 64p. My rollercoaster ride came with Premier Foods.
I invested modestly in Premier Foods because although it looked like recovering being such a big company, it did have huge debts. The share price in October 2011 was just 4p. That share price didn’t really inspire confidence in investors minds even though it did start to climb. The company decided to do a share swap 1 new share for 10 old ones. The price started to soar now, right up to 185p. It was a multi-bagger! I had paid the equivalent of 40p a share and was making a big profit and the future looked rosy. The company still had debts and problems and then we came to the rights issue when I was asked to buy even more at 50p each. My average now was 46.15p a share but the directors in the company paid, even more, their average was over 80p.
The next part of my story will be brief. Recovery took longer than expected and the share price slumped and at one stage was below 30p. I was losing money. The story on the rest of my investments on the stock market was similar. I have thought though that prices were way too low and the companies I was invested in would be the subject of takeover bids.
Today, it was announced a bid has been made for Premier Foods valuing the shares at 60p. The price soared to 50p a share. I’m in profit! The relief…
It’s not over, though, the price is still way off what it was, even when the company had huge debts. I can’t forecast the future but I still think 200p is possible.
So, that’s my story of trying to turn 4p shares into 200p shares. I still haven’t got there, but at the time of writing, 50p looks good.