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Short term and long term #investments

We have to think both short term and long term when we invest. While we want to see a return on our investments on paper because that gives us a virtual return and so adds to our financial security. We also want to see real returns when we sell or when we collect dividends.

The FTSE 100 is at least is back up from below 6,000 to over 6400 so the main market is recovering. There appears to be still a nervous preference for companies with a large market capitalisation. This can make shares over-priced. There is an element of a Ponzi scheme about the stock market, where trades go through on the basis of sentiment rather than sound financial analysis.

Brokers analyse and make their recommendations available to the market. UBS gave Tesco a buy rating a few days ago and a target of 250, then today Credit Suisse give it a underperform rating and a target of just 155. This shows the ratings are based more on sentiment than research and analysis. The price today is 205.10, which I think is too low. I don’t do ratings but if I did I would say the Santa rally could take it to 250, so UBS are about right.

To get a good return we have to take risks and the AIM Market is risky. I admit to being over exposed to the AIM, but I have to take a long-term view and AIM shares can soar unexpectedly. I think we are due some good news from Solo Oil soon and similarly I expect Verona Pharma will have some positive news soon too.  They have both been unstable recently with private investors buying low and trying to sell high. They are both exploration companies, Solo exploring for oil and gas and Verona exploring for new medicinal compounds. They both have projects on-going that look good and we just have to wait for significant developments to see prices soar. I think Solo will be the first one as it changes from an explorer to a producer before the end of the year.

Graphene Nanochem is technically a good investment, but they need to engage with investors and inspire a little confidence. They do seem to be attracting some attention and the share price has been creeping up. They need a significant breakthrough in their research and more sales. In the final analysis, it’s profits that drive further investment.

Immupharma has a lot of potential with a new drug for lupus, again they need to engage with investors and potential investors or they could have difficulty getting investment in the future or even find it impossible to raise investment.

These AIM companies are a long term prospect and have a place in a diversified portfolio. They quite often soar quite spectacularly on a little news or a breakthrough and that can happen when the main market is down and returns are falling.

That’s it for today. I’m glad to say that many of the companies that I have in my portfolio will probably gain if there is a significant Santa rally and that seems more likely this year.

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