Member poll: Bluechip sale and reinvestment or hold

Discussion of the proposed Cashback Investment Club

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We should....

Sell bluechips and invest in Pure Gold Mining
6
55%
Sell bluechips and invest in Bakkavor
5
45%
 
Total votes: 11

garindan
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Member poll: Bluechip sale and reinvestment or hold

Post by garindan » Mon Jul 13, 2020 1:05 pm

EDIT: I HAVE REMOVED TWO OPTIONS. IF YOU HAD PREVIOUSLY VOTED TO KEEP THE BLUECHIPS PLEASE CAST YOUR VOTE AGAIN. IF YOU HAVE VOTED FOR EITHER PURE GOLD MINING OR BAKKAVOR PLEASE REVIEW YOUR CHOICE AS FURTHER INFORMATION POSTED BY MEMBERS MIGHT BE HELPFUL.


Members,

We have been discussing ways we could look to take advantage of the current market to invest further in one of three shares we currently own in order to move on our loss making bluechip shares and turnaround the situation by making gains. The three shares we have been discussing are:

Pure Gold Mining - this share fell to around 27p in lockdown but has seen great price growth over the past weeks and continues to rise at a signficant rate due to very positive mining news and investment from well known and respected investors. This share could see a rapid opportinity to make quick and substantial gains to cover the original loss.

Bakkavor - this share has seen its value rapidly decrease since lockdown, rise to ~100p and fall back again. There is potential for a recovery, but it is not currently clear how much the lockdowns in Europe have effected the business, with the share currently half the price we originally paid for it.

Ramsdens - this share also saw a rapid decline in value during lockdown, falling from what would have been a very reasonable profit margin if we'd sold, to being signficantly less than the purchase price we paid. The price has since recovered from the low to sit around 150p, which is some 100p less than the previous high before lockdown. There is potential for a recovery, but it is not currently clear how much the lockdowns have effected the business.

Our bluechip investments cost:

- Vodafone £599.39
- Aviva £599.61
- ITV £619.19
Total: £1818.19

Our current bluechimp investments, as of Monday 13th July 12pm were valued as follows:

- Vodafone £340.70 + £68.47 divi = £409.17
- Aviva £332.10 + £68.45 divi = £400.55
- ITV £165.02 + £114.64 divi = £279.66
Total: £1089.38

Our total loss on these is currently: £728.81 / 40%

The target selling price after purchasing Pure Gold Mining, Ramsdens or Bakkavor shares would be a percentage gain that matches the loss percentage, plus an additional 2.5% to cover costs of all share transactions. Once this target price is achieved the shares bought to implement this strategy will be sold and the money made available for reinvestment.

There are risks involved with this approach. We do not know what will happen with these three shares in the coming months. Placing additional investments in these higher risk companies does double-up the chances of making a significant loss. However, the counter side of the argument is the opportunity to make rapid price gains - a completely different situation to bluechips.

Of course we don't have to do this either, so you can vote to keep the bluechips.

It is really important to take a read of the discussion we have been having in this thread as well as contributing your own thoughts here.
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garindan
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Re: Member poll: Bluechip sale and reinvestment or hold

Post by garindan » Mon Jul 13, 2020 1:15 pm

So I wanted to add a little personal thought to this debate. I have advocated Pure Gold Mining. I can see how we could realise a recoup of the losses made through the bluechip investments by further investing in this share. The caveat on this is I have always had 200p as a price in my head as a potential safe haven partial exit price. I was thinking we should sell £1000 worth of the Pure Gold Mining holding if the price hit 200p, so we' have purely profit shares left and our original investment would have been recovered in full. I would also envisage this 200p price as being the maximum level I'd be comfortable trying to recoup our bluechip investment at saletime. At the current price of 136p, the 42.5% premium to it would work out at 194p, so we have only a small margin for manoever at the moment.

Bakkavor does show a pretty reasonable potential for making the 42.5% premium back on the current price of 68p - it would still be less than 100p as a sales target, and perhaps be quite achievable. However, I am concerned what state the business is in and how much lockdown as been effecting it. There is little to go on, so I feel rather blind to the situation.

Ramsdens is teetering on a recovery position. It has been around the same price for a while and news of what state the business is in and how it intends to move forward is crucial for seeing how viable a share price recovery is. I'm not convinced it will bounce back to the 250p+ highs of pre-lockdown. It would need to get to ~217p to realise a 42.5% premium. Can it make that? I'm not personally sure.
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Re: Member poll: Bluechip sale and reinvestment or hold

Post by hiswitzend » Mon Jul 13, 2020 1:19 pm

Whilst I can see the allure of Pure Gold, I am reluctant to put all our eggs in 1 basket.

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Re: Member poll: Bluechip sale and reinvestment or hold

Post by Beachboy » Mon Jul 13, 2020 8:25 pm

garindan thanks for sharing your thoughts. I am interested to know a bit more about your thinking behind the PMG 200p figure. Is it a nice round figure aspirational figure or based on something with a firm rationale? Like hiswitzend I have concerns about all our eggs in one basket. Yet to make my mind up, so will be interested to see how the discussion develops.

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Re: Member poll: Bluechip sale and reinvestment or hold

Post by harinmenon » Mon Jul 13, 2020 8:43 pm

Should we be splitting it across the three? Either one on its own looks risky in the shorter term.
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Re: Member poll: Bluechip sale and reinvestment or hold

Post by garindan » Mon Jul 13, 2020 9:38 pm

Beachboy wrote:
Mon Jul 13, 2020 8:25 pm
garindan thanks for sharing your thoughts. I am interested to know a bit more about your thinking behind the PMG 200p figure. Is it a nice round figure aspirational figure or based on something with a firm rationale? Like hiswitzend I have concerns about all our eggs in one basket. Yet to make my mind up, so will be interested to see how the discussion develops.
The 200p figure is more me thinking aloud about what I consider the best exit point, to bring in a considerable profit position, to be able to get the original investment back and leave enough in the oven to see where things go from there without the risk (or at least without the risk of losing our stake). I've been reading a fair bit of the commentary, looked at the numbers, watched some of the interviews with PGM and considered things to satisfy myself. One of the biggest factors is seeing the investments that have been made recently, that peers in the area have much greater valuations (more mature mines of course) and 200p seems, if anything, quite a timid ambition over time if all goes well. As a club I'm thinking we need a stabilisation point, so that's where the 200p comes into things.

I can't say that my research should satisfy you or other members though. There are plenty of things to look at, the link from share.com, the ADVFN forums and so forth offer quite an insight to how some are thinking and the interest in this company. I would strongly advise taking a further look.

I have been against selling the bluechips in the past. My main view has been I think most will recover a fair amount, but as COVID-19 effects have compounded things making the current position worse, I don't think we'd be back to where we would be "even" for many years. My concern has been trying to see a way out, that is positive and offers a reasonablly good outlook to make a gain against that loss.

I'm not really keen to sell the bluechips without a strategy or for the potential of another share that might only gain 20% but still have the same sort of risk of losing money as any other. That might seem like some sort of warped logic to some, but I'm thinking the bluechips might be safer at their current price and could also rise 20% in the same timeframe, thus making the risk of selling far greater than just holding. Hence why I am looking at PGM.
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Re: Member poll: Bluechip sale and reinvestment or hold

Post by garindan » Tue Jul 14, 2020 12:37 pm

harinmenon wrote:
Mon Jul 13, 2020 8:43 pm
Should we be splitting it across the three? Either one on its own looks risky in the shorter term.
Sorry, I forgot to reply to your post harinmenon - apologies.

If we were talking a couple of thousand pounds to invest it would be possible, yes. However, the costs associated with buying three separate shares in lower amounts add up, especially as we'd also be selling three shares as well. It would cost us £45 alone in the sale/purchase commission for 6 transactions. There might be other costs to factor in too - I'd need to double check that but you see what I mean.
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Re: Member poll: Bluechip sale and reinvestment or hold

Post by richard@imutual » Tue Jul 14, 2020 2:03 pm

We would raise about £850 from the sale of the 3x blue chips. Our current holdings in the other three are:

Pure Gold Mining £3068
Ramsdens £812
Bakkavor £488

So splitting the £850 across all three would actually be more risky, because we'd remain as heavily weighted in a single stock
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Re: Member poll: Bluechip sale and reinvestment or hold

Post by AAAlphaThunder » Wed Jul 15, 2020 5:42 am

Me, personally, in my humble opinion, as I know what we will do with the loss and have a clear strategy to make the loss back, consequently, I'm happy to sell the bluechip shares and re-invest in Pure Gold Mining.
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Re: Member poll: Bluechip sale and reinvestment or hold

Post by richard@imutual » Thu Jul 16, 2020 3:38 pm

Well, I see that there are currently no other takers for my choice of Bakkavor but just for the record here are a few links with info

https://www.fool.co.uk/investing/2020/0 ... old-to-me/

https://www.stockopedia.com/articles/wh ... ors-81358/

https://simplywall.st/stocks/gb/food-be ... ve-summary
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