I bought 1000 shares in RCG Holdings Group (RCG:LSE) on the 26th of September for 67p per share (62% of their 52-week high point). This is an RFID and biometrics company with a wide product portfolio and huge growth in China. Without going into all the numbers it's a succesful company which is consistently beating expectations but despite this it trades on low P/E ratio of less than 4. This is perhaps due to general market pessimism and also due to the concerns about governance.
The main concerns around the company are related to ownership (27.6% owned by an estate where the will is being disputed), inconsistent dividend and share buy-back policies and the Bermuda registration which side-steps some regulations. A financial down-turn in China could have a heavy impact on the company, however it is not reliant on a single market.
On the upside, the company is delivering positive results, has excellent growth prospects (20% overall market growth is helping the company expand) and profit margins are great. Additionally RCG is about to dual list on the Hong Kong exchange which will bring in stricter governance requirement and thus make the company more attractive to institutional investors.
One of the drawbacks with it's current AIM-listing in London is that 1000 shares is the maximum Buy amount available which drives up transaction cost to about 2%. From a risk exposure point of view I'm looking at a holding of a maximum 5000 shares (25% of portfolio), so potentially I'm making 4 more buys of this share over the coming months.
Tuesday 30 September 2008
Saturday 20 September 2008
Credit score management
The importance of a good credit score when trying to arrange a loan, set up a new credit card or take out a mortgage is well known, especially to those who at some point ran into problems and had to obtain copies of their own credit report and address the problems in it. As this can be a fairly slow process it is best to include credit score monitoring as part of regular personal finance management rather than wait and potentially discover problems at a time when you may need credit quickly.
Unfortunately this is made somewhat tedious by the existence of multiple companies providing credit score information. Equifax and Experian are well known names, while the newer Callcredit Information Group has only been around under that name since May 2008. As companies you deal with may go to any of these providers for a credit report it's unfortunately necessary to monitor your data with all of three.
To keep costs down you can opt for getting the statutory report that you are entitled to under section 7 of the Data Protection Act from 1998. While this is free you are likely to be charged a few pounds for getting it mailed out to you. Opting for the more expensive online report and optionally also the rating is likely to be faster and a bit more convenient, but will set you back £15 or thereabout.
One trick to get around paying for credit reports is to ask for a copy from any company which you open an account with. A friendly request may be enough to convince them to email you a copy, alternatively you can nudge them with a mention of the Data Protection Act although the latter may be met with instructions to request this in writing and submit a fee to cover their expenses.
Once you have a copy of your report the most important things to check is that you are correctly listed on the electoral roll at the right address and that there is no incorrect information (for example entries for a former partner that you had a joint account with). It's helpful if you have at least two credit agreements in good standing (ie paid on time) as this re-assures other companies that you have well managed finances.
Unfortunately this is made somewhat tedious by the existence of multiple companies providing credit score information. Equifax and Experian are well known names, while the newer Callcredit Information Group has only been around under that name since May 2008. As companies you deal with may go to any of these providers for a credit report it's unfortunately necessary to monitor your data with all of three.
To keep costs down you can opt for getting the statutory report that you are entitled to under section 7 of the Data Protection Act from 1998. While this is free you are likely to be charged a few pounds for getting it mailed out to you. Opting for the more expensive online report and optionally also the rating is likely to be faster and a bit more convenient, but will set you back £15 or thereabout.
One trick to get around paying for credit reports is to ask for a copy from any company which you open an account with. A friendly request may be enough to convince them to email you a copy, alternatively you can nudge them with a mention of the Data Protection Act although the latter may be met with instructions to request this in writing and submit a fee to cover their expenses.
Once you have a copy of your report the most important things to check is that you are correctly listed on the electoral roll at the right address and that there is no incorrect information (for example entries for a former partner that you had a joint account with). It's helpful if you have at least two credit agreements in good standing (ie paid on time) as this re-assures other companies that you have well managed finances.
Friday 19 September 2008
Micro level inflation
At a time when inflation rates are making daily headlines and the central bank appears powerless to combat it due to the major credit market issues it is important to remember that it does not affect everybody equally. While macro level inflation can be useful as a general indicator it is unlikely that you are seeing the same level of inflation in your personal (micro level) finances.
Using an online tool such as http://news.bbc.co.uk/1/hi/business/7610430.stm can allow you to determine micro level inflation with some accuracy. As any growth investing should be done with a view to beat inflation after costs and taxes are accounted for, using a tool like that on an annual basis is a good idea and only takes a few minutes. Basically it lets you set the goalposts accurately and also cushions any emotional response from seeing all the depressing headlines in mainstream media.
It's also interesting to tinker with the inputs to see how modifying expenses affects the personal inflation rate. For example dropping a £200 expense of eating out reduces my inflation rate by 0.2% but not paying a mortgage increases it by 2.7%. If my mortgage was twice as large then my personal inflation rate would drop to 2% as more of my outgoings would be towards this static payment. Thankfully the mortgage industry hasn't yet had the idea to force inflation adjustment on mortgage repayments on us.
Using an online tool such as http://news.bbc.co.uk/1/hi/business/7610430.stm can allow you to determine micro level inflation with some accuracy. As any growth investing should be done with a view to beat inflation after costs and taxes are accounted for, using a tool like that on an annual basis is a good idea and only takes a few minutes. Basically it lets you set the goalposts accurately and also cushions any emotional response from seeing all the depressing headlines in mainstream media.
It's also interesting to tinker with the inputs to see how modifying expenses affects the personal inflation rate. For example dropping a £200 expense of eating out reduces my inflation rate by 0.2% but not paying a mortgage increases it by 2.7%. If my mortgage was twice as large then my personal inflation rate would drop to 2% as more of my outgoings would be towards this static payment. Thankfully the mortgage industry hasn't yet had the idea to force inflation adjustment on mortgage repayments on us.
Thursday 18 September 2008
Savings accounts pitfalls
At a time of financial uncertainty, with household names like Bank of Scotland facing a run as panicked savers withdraw their money, it is important to take a rational approach and ensure that your personal savings are protected and will remain accessible in case of a crisis.
One of the most important principles in managing finances is to avoid having all your eggs in one basket. While most financial companies will encourage you to have various accounts with them and it may be convenient to work with just one company this can cause huge issues if that company subsequently fails. Some of the risks may not be immediately apparent, so here is a list of things I've found myself having to consider this week.
Insured maximum
In the UK, the Financial Services Compensation Scheme guarantees your savings up to a maximum of £35.000 with each institution. It's important to note that the guarantee is not per account but rather per institution and that some institutions trade under multiple names. For example Halifax, Bank of Scotland and Intelligent Finance are all part of HBOS and if you had a combined total deposit exceeding £35.000 across these three then you would be exposed to loss and should move part of the money. If in doubt check the FSA registration number to ensure it's not the same parent company.
Access to funds
If you have all your savings with a single company and they go under you may find yourself in short term difficulty. While the government guarantees your savings up to the maximum of £35.000 it may take several months to pay out. It is also well to remember that the guarantee is untested and unfunded, relying on a levy of the financial companies (capped at 4 billion, which is insufficient to cover any of the top banks failing) or a Bank of England loan to fund payouts. Splitting your savings across multiple financial institutions ensures that one company failure does not leave you cut off from all your funds.
Credit offset against debt
This is in my opinion the killer argument against offset mortgages but also well worth considering for any other debt you may have. If you have both savings and debt with a bank that fails then the government guarantee will only pay out whatever savings are left after paying off the loans. Thus when savings and loans are held with the same bank it would result in zero payout if the loans are of the greater value. If you are dependent on access to your savings this could be catastrophic, essentially you would be making a forced repayment and be left with zero liquidity at a time of crisis.
Restrictive terms and conditions
Kaupthing offers an excellent interest rate on savings, but on reading the T&C document I noted that they reserve the right to refuse withdrawal requests for up to 60 days. Thus if a run developed on the bank they could prevent you from withdrawing your money for 60 days, after which if they failed it could be another 60 days before the government guarantee paid out. Four month with no access to funds and likely zero interest paid is not an attractive proposition.
One of the most important principles in managing finances is to avoid having all your eggs in one basket. While most financial companies will encourage you to have various accounts with them and it may be convenient to work with just one company this can cause huge issues if that company subsequently fails. Some of the risks may not be immediately apparent, so here is a list of things I've found myself having to consider this week.
Insured maximum
In the UK, the Financial Services Compensation Scheme guarantees your savings up to a maximum of £35.000 with each institution. It's important to note that the guarantee is not per account but rather per institution and that some institutions trade under multiple names. For example Halifax, Bank of Scotland and Intelligent Finance are all part of HBOS and if you had a combined total deposit exceeding £35.000 across these three then you would be exposed to loss and should move part of the money. If in doubt check the FSA registration number to ensure it's not the same parent company.
Access to funds
If you have all your savings with a single company and they go under you may find yourself in short term difficulty. While the government guarantees your savings up to the maximum of £35.000 it may take several months to pay out. It is also well to remember that the guarantee is untested and unfunded, relying on a levy of the financial companies (capped at 4 billion, which is insufficient to cover any of the top banks failing) or a Bank of England loan to fund payouts. Splitting your savings across multiple financial institutions ensures that one company failure does not leave you cut off from all your funds.
Credit offset against debt
This is in my opinion the killer argument against offset mortgages but also well worth considering for any other debt you may have. If you have both savings and debt with a bank that fails then the government guarantee will only pay out whatever savings are left after paying off the loans. Thus when savings and loans are held with the same bank it would result in zero payout if the loans are of the greater value. If you are dependent on access to your savings this could be catastrophic, essentially you would be making a forced repayment and be left with zero liquidity at a time of crisis.
Restrictive terms and conditions
Kaupthing offers an excellent interest rate on savings, but on reading the T&C document I noted that they reserve the right to refuse withdrawal requests for up to 60 days. Thus if a run developed on the bank they could prevent you from withdrawing your money for 60 days, after which if they failed it could be another 60 days before the government guarantee paid out. Four month with no access to funds and likely zero interest paid is not an attractive proposition.
Wednesday 17 September 2008
A portentous moment
I'm calling this week as the point of greatest pessimism.
The stockmarkets may fall farther, the government may fall (or at least the Labour party leadership) there may be bankruptcies, recession and even depression to come but I'm marking this week and especially today as the point in time when it seems there is the least light and hope to be found anywhere. Talk today is of buying gold, of 3-4 years of being 'in the hole', of keeping money under the mattress, about not trusting banks and about the greatest regulatory failure of a century. It's hard to imagine a bleaker view of the future that still leaves the British pound as a useful currency. If things get worse, with major banks going bankrupt and tens of millions of people losing their savings, with government guarantees failing and major social upheaval then all that is perceived as 'normal' middle class lifestyle and society would evaporate.
Instead of this doomsday scenario I expect more turmoil as financial shake-outs continue, but gradually the government interventions, mergers and perhaps realisation that assets were written down too aggressively will turn the tide. When the media newsflow eventually turns positive the market reaction will be rapid and decisive, with what could be the greatest single day gains to be seen in a decade. Newly created financial giants will have dominant market positions with billion pound profits from retail banking and mortgages, secure and steady in much the same way as electricity and water utility company profit streams. When that happens I want to be fully invested in equity.
Today I transferred twelve thousand pounds to a stockbroker deposit account. Once the money clears, I will begin to invest it in long term recovery plays, with a view to buy steadily on dips in prices. Predicting short term price movements is beyond my abilities and I work full time so day trading is out of the question. Instead I will aim at long term buy and hold, building up stakes in quality companies gradually in anticipation of a future recovery and the boom when hot money returns to UK equity markets. The investment time scale is 15 years minimum and the money is a separate portfolio from my pension savings and mortgage repayment (both of which are in low cost index trackers). If I lose the entire portfolio I should still be able to pay off the mortgage and retire at a reasonable age, if all goes well I may be able to retire early and in greater comfort.
Taxes are a consideration as my ISA allowance is already maxed out and this portfolio will be subject to UK capital gains taxation. For the current tax year I'm already very close to max CGT allowance for this tax year so any profitable sales will be taxed. Trading costs will also be tracked closely, I'm using an online execution only stockbroker to keep costs down.
Tonight I'm hoping for a good nights sleep as tomorrow I need to be fully rested for crossing the Rubicon.
The stockmarkets may fall farther, the government may fall (or at least the Labour party leadership) there may be bankruptcies, recession and even depression to come but I'm marking this week and especially today as the point in time when it seems there is the least light and hope to be found anywhere. Talk today is of buying gold, of 3-4 years of being 'in the hole', of keeping money under the mattress, about not trusting banks and about the greatest regulatory failure of a century. It's hard to imagine a bleaker view of the future that still leaves the British pound as a useful currency. If things get worse, with major banks going bankrupt and tens of millions of people losing their savings, with government guarantees failing and major social upheaval then all that is perceived as 'normal' middle class lifestyle and society would evaporate.
Instead of this doomsday scenario I expect more turmoil as financial shake-outs continue, but gradually the government interventions, mergers and perhaps realisation that assets were written down too aggressively will turn the tide. When the media newsflow eventually turns positive the market reaction will be rapid and decisive, with what could be the greatest single day gains to be seen in a decade. Newly created financial giants will have dominant market positions with billion pound profits from retail banking and mortgages, secure and steady in much the same way as electricity and water utility company profit streams. When that happens I want to be fully invested in equity.
Today I transferred twelve thousand pounds to a stockbroker deposit account. Once the money clears, I will begin to invest it in long term recovery plays, with a view to buy steadily on dips in prices. Predicting short term price movements is beyond my abilities and I work full time so day trading is out of the question. Instead I will aim at long term buy and hold, building up stakes in quality companies gradually in anticipation of a future recovery and the boom when hot money returns to UK equity markets. The investment time scale is 15 years minimum and the money is a separate portfolio from my pension savings and mortgage repayment (both of which are in low cost index trackers). If I lose the entire portfolio I should still be able to pay off the mortgage and retire at a reasonable age, if all goes well I may be able to retire early and in greater comfort.
Taxes are a consideration as my ISA allowance is already maxed out and this portfolio will be subject to UK capital gains taxation. For the current tax year I'm already very close to max CGT allowance for this tax year so any profitable sales will be taxed. Trading costs will also be tracked closely, I'm using an online execution only stockbroker to keep costs down.
Tonight I'm hoping for a good nights sleep as tomorrow I need to be fully rested for crossing the Rubicon.
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