What is our sell price?

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garindan
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What is our sell price?

Post by garindan » Mon Feb 15, 2016 6:39 pm

Members,

I wanted to start a new topic about firming up our sell prices for each of the shares we currently hold, SHRE aside. I'm more interested in sell price at the moment than any kind of stop prices, as the market is really unpredictable and fallible to quite large sudden drops and recoveries, which could cause us a severe problem should we set stops.

So looking at each in turn, I'd like to hear your thoughts on each of the suggestions below:

Royal Dutch Shell B
Looking at the past 5 years, the share price peaked at about 2600p a share. This was only for a short period and for the most has not been much more than ~30% higher than now. So realistically I think our target sell price should not exceed this percentage point. If we were to realise this premium price, it would be the equivalent of between 3 and 4 years dividends at the current rate (which are obviously subject to change at any time, even if Shell suggest they will not cut the rate). Therefore I'd suggest we have a target sell price of no more than 2000p and take the income generation of ~8.5% if the price does not hit this point. There is definitely some potential for us in this share.
Summary: suggest 2000p sell price (+23%)

United Utilities
This is a company on a growth path. Historically the share has not been higher than ~1050p. The dividend yield is ~4.5%. We bought at 956p (including costs), so the difference between our cost and highest ever price is only ~10%. What is a sensible exit price here? It is a difficult one to think exit vs income vs realistic expectation. If we follow a line of growth from Feb 2011 the value hits various peaks but goes from 558 to 727 to 787 to 901 to 1006. Following this into the future perhaps about 1100 is a sensible growth target price, representing about 13% premium to the purchase price? How 'interesting' is this share for us though? Growth does not look inspiring and the divi is middle of the road. Should we be holding this one or looking to sell and replace with something offering a little more potential?
Summary: suggest 1100p sell price (+13%)

Sainsbury
This has simply not worked out as had been desired. We bought at 279p just shy of the high point 285p in the last year. Historically the share value has been much higher - nearly 600p in 2007 and about 410p in 2013. This was before a number of significant price crashes. Unfortunately it looks like we bought at a peak time in the depressed new market value for the shares, as can be seen in the 3 year chart. The dividend yield is currently ~5%, which is greater than UU. One side of me says there is significant growth potential if Sainsbury gets it right but how long would this take and is it worth waiting for? The other side of me says this sector is very risky and I wonder if things will get worse still before they start to get better? I am hoping that the results of the Netto collaboration will be announced in the positive and that the Argos tie-up will be seen in positive light when finally confirmed, pushing the price up to a satisfactory selling point. However, my personal view is we should try and sell this one as soon as we have a good opportunity to do so. We have already taken ~4.4% in dividends, so if we were to sell in the region of -2.5% or better we would not be out of pocket, after sales commission. I wonder if the period we have held this one is probably enough if an opportunity like this arises again, like it did in the recovery from the 20% drop in value the share had last year.
Summary: suggest 273p sell price (-2%)

GSK
We paid 1471p per share for the 38 we hold. Historical high has been just short of 1800 in the last 10 years. There has been significant periods between the value of 1300 and 1500 in this time. It has peaked at 1600 on at least 8 different occasions over the past 3 or 4 years. However, 1600p a share would only be an 8% premium on the price we paid and 1800p still under 20%. Dividend payments have been at nearly 6% per year the past few years, which is healthy. New drug sales have been reported as going well, which is a significant element in pharma companies. However, being recently fined for supposed price fixing and suppressing competition via payments puts their marketing practices for 'old' drugs into question. I worry if they are going to be caught doing the same with similarly old drugs... So realistically what are the prospects for growth and a potential sale price? 1800 seems quite a way off, but the dividend is good. Is a sub 20% target price premium sensible or lacking ambition?
Summary: suggest 1800p sell price (+18%)

ITV
ITV is another growing company. The share value has been in a steady positive movement since first quarter 2009. The dividend is not very high - only ~2.5% and doesn't look like growing to the level we might like to see as an income returner. Looking at the growth line it would suggest continued growth of the company could see at least a 300p valuation at some point, as opposed to our purchase price of 252p. This would represent an ~16% premium. We bought this company to turn a profit on share price, not to make money via the dividend. Would this return be suitable? Personally, I think this is achievable and if we could do this in under 2 years of holding it would be a good result.
Summary: suggest 300p sell price (+16%)

So that completes my thoughts about our individual shares. I'd be really interested in your thoughts whether they are :thumbup: or :thumbdown: :lol:
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Re: What is our sell price?

Post by kevinchess1 » Mon Feb 15, 2016 7:20 pm

Broadly agree with your thoughts with the exception of sainsburys
I feel this has been a bit of a dog for us and we should sell it if/when it get to 250
AND
we should restore the Stop/Loss on this
We have only just brought Royal Dutch let see how this one goes also ITV seems to be okay I'd be inclined to keep this one for a bit Maybe we should set Stop/gains on some of these shares
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garindan
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Re: What is our sell price?

Post by garindan » Mon Feb 15, 2016 8:34 pm

kevinchess1 wrote:I feel this has been a bit of a dog for us and we should sell it if/when it get to 250
AND
we should restore the Stop/Loss on this
There is little doubt it hasn't performed as we had liked but the dividend is pretty reasonable. I think once the dust settles, which might be a few months yet, we should see progress. I personally think the money could be better invested elsewhere on a better option but would rather not see us make a loss when there is still good potential to get out without our fingers having been burned in the process. Tesco has been quietly recovering in value too, so I have a little more confidence in positive progress towards a reasonable get out point for us on this one all considered.

The trouble with the stop/loss on this one is the sudden knee-jerk reaction to things that make the news - the press are loving the supermarket troubles. It makes for great scaremongering stories and drama. If it were not a shop known countrywide they would be less inclined to create such 'news'.
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Re: What is our sell price?

Post by timco » Mon Feb 15, 2016 8:45 pm

Sometimes it is better to cut your losses if there is a better place to invest the money no point hanging on because you could be losing the value you lost in a share that could have gained, if you see what I mean.

Personally I think the Sainsburys share price has not been fulfilling its potential but then this is largely down to a practice that should be banned, sort selling. Sainsburys is still the biggest short sold share in the FTSE 100 and this is a self fulfilling prophecy for those short selling as selling huge amounts, or as they do churning large amounts, of shares depresses the price. (Churning is the reason why the share price goes up a lot as the shorters buy the shares back and then for the price drop as they sell them again.

Now back to my main point: If the money raised even at a loss on purchase can be invested in a share with the potential to raise more capital than the share selling in the short term then this should be done. No point waiting for a share to rise 5% to break even if the other share rises 25% in the same time period. Although the sharers you held did not make you a loss you have lost 20% in value by the others rising.

I have always been clear that I hold Sainsburys for income not capital gain and I do buy at a significant discount due to being an employee.

Will be interesting to see what happens after the takeover of Argos which I still think is over priced.
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Re: What is our sell price?

Post by William Joseph1 » Mon Feb 15, 2016 9:37 pm

I am happy to go along with your suggestions. I do feel that GSK & RDS should be for the long-term despite the recent issue with GSK
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Re: What is our sell price?

Post by AAAlphaThunder » Mon Feb 15, 2016 10:35 pm

Firstly, as they say over at HUKD heat for the effort.

Well thought-out, well researched and well written.

Well done.
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Re: What is our sell price?

Post by AAAlphaThunder » Mon Feb 15, 2016 10:37 pm

I would be in favour of only ever selling at a profit. I think it would set a bad precedent, especially if the first share we sold, we sold for a loss.

As for the rest of you anyalysis spot-on. You have truly hit the nail on the head.

ITV I would sell at 10% and hope for some bad news to buy back.
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Re: What is our sell price?

Post by William Joseph1 » Mon Feb 15, 2016 10:41 pm

underdog wrote:I would be in favour of only ever selling at a profit. I think it would set a bad precedent, especially if the first share we sold, we sold for a loss.
Sometimes you have to accept a loss to stop a disaster.
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Re: What is our sell price?

Post by kevinchess1 » Mon Feb 15, 2016 11:05 pm

Yes, sell at a little loss to avoid a bigger loss
Not all of our purchases will make money
that's the nature of the beast
Besides we couldn't sell without a vote and it might not go the way of wanting to sell
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garindan
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Re: What is our sell price?

Post by garindan » Mon Feb 15, 2016 11:22 pm

timco wrote:Sometimes it is better to cut your losses if there is a better place to invest the money no point hanging on because you could be losing the value you lost in a share that could have gained, if you see what I mean.
I'm sure there are better options out there. The trouble is we have not spotted them yet and would need to do so first :D If we were going to sell these for a loss I would personally want to know we were investing in something we were very confident in as a replacement.
William Joseph wrote:Sometimes you have to accept a loss to stop a disaster.
Spot on for sure. However, I must add - with Sainsbury I certainly wouldn't call it a disaster stage - far from it really. It is just "not ideal" in my books. If we were 20% down, had a poor divi and nothing to sniff a return to better fortunes it would be firmly in that territory though.
timco wrote:Will be interesting to see what happens after the takeover of Argos which I still think is over priced.
I am minded that we should not miss out on a potential price climb if the tide of opinion turns in favour of it being a better idea than the doubt that was originally expressed. It is evident this was a changing view and more analysts were warming to the concept. If in the meantime we got to the escape point I have proposed we should probably jump ship to lock-in our position. Certainly we need to review our position once this particular scenario has played out, as I don't think the impact of the Netto tie-up will be as striking and I am not sure what other positive news is on the horizon for the sector. I could be wrong but the Netto thing is only a relatively small experiment compared to the impact of the Argos purchase. What I would really hope is some positive news on this is dropped into consideration in advance of the confirmation of the Argos purchase...just to make things interesting.
underdog wrote:I would be in favour of only ever selling at a profit.
I think we have to be realistic and if there is good reason to sell, such as in a scenario above when we have a very promising replacement in mind, we would be silly not to sell for a loss.
underdog wrote:I think it would set a bad precedent, especially if the first share we sold, we sold for a loss.
I do see the sentiment of this, which is why the point above is a precursor to any sale at a loss unless we are in the territory William Joseph described.
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