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Barclays and BP Ordinary Shares
Vector 7354
Posted: 07 May 2018 16:59:35(UTC)
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Guys

I have held Barclays and BP share for some time. I saw them as a long term investment back in 2005 but I noticed recently that Barclays we’re trading at Circa £ 2.05 per share (I purchased these when they were £5.50....not a wise decision in hindsight thanks to the market drop of 07 ! ) The BP shares have faired better but I am still in the red. I’m am thinking of now cutting my losses as the dividends have been poor. I was therefore thinking of certainly selling Barclays and using the cash to buy into other companies/ IT. Does any one have a view on my intentions.
Sara G
Posted: 07 May 2018 17:25:57(UTC)
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When it comes to individual shares, especially cyclicals, I don't think they are the type of investment you can lock away and forget about over decades, so the lesson going forward might be to monitor your investments more closely, or go for a fund or IT and let the manager worry about when to buy and sell. TMPL is a good choice if you want to stick to value sectors.

As regards Barclays and BP in particular, I'm not sure I understand whether you are taking the dividends into account when you say you are in the red?

In any case, now may be a good time to buy... banks tend to do well when interest rates rise, and BP (which I hold) is starting to emerge from the shadows of the Gulf of Mexico catastrophe and results are promising. They are able to survive with oil prices considerably lower than where they are now, and have been cutting costs - the dividend looks secure.
3 users thanked Sara G for this post.
Vector 7354 on 07/05/2018(UTC), King Lodos on 08/05/2018(UTC), Road-Man on 13/05/2018(UTC)
Vector 7354
Posted: 07 May 2018 17:59:33(UTC)
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I think you have a valid point regarding BP so may well hold these for now. As for BARCLAYS they are over 100% down on what I bought them for. so recovery to the days of £5+ share seems like a long way off?
Alan Selwood
Posted: 07 May 2018 22:43:56(UTC)
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All of this is a value judgment, which may or may not be borne out by future events.

For my own money, I would be wary of banks anyway, because they are cyclical, and that means you need to be selective about when to own them and when not.

If you do want to own a bank, why just one, and why Barclays? Are there more attractive ones on offer? If you could do a sideways move into one that has better prospects, why stay with an existing holding just because you are nursing losses? I would be thinking of Lloyds, Handelsbanken and a fair few others rather than Barclays, given recent events and commentators' opinions about prospects. But if I was wanting to buy something in the financial sector, why one bank? Would it make more sense to smooth the inbuilt volatility of this cyclical holding by using an insurance company too (e.g. Prudential), or a fund like Jupiter Financial Opportunities?

Oil, as another cyclical sector, is heavily reliant on the oil price rising, on new reserves being cheap to develop (unlikely!), and you have to ask yourself why BP? Why not Shell? Or Exxon? Or a spread via a minerals/commodities fund?

If you think that VALUE is the next big thing, why not an IT bought at a discount that goes into the marketplace with this slant? (Rights & Issues? Fidelity Special Values? etc).

Worth doing some in-septh research and talking yourself through various strategies before jumping in feet first with 'the one I've heard of' or similar simplification.
3 users thanked Alan Selwood for this post.
King Lodos on 08/05/2018(UTC), Money Spider on 09/05/2018(UTC), Road-Man on 13/05/2018(UTC)
King Lodos
Posted: 08 May 2018 01:56:27(UTC)
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Two perspectives broadly in line with those:

Cyclicals (banks and energy basically) roughly follow a pattern where they do well for 7 years, then poorly for 7 years .. Roughly tracks a typical business cycle:

Recession -> Low inflation (bad for energy) -> Low rates (bad for banks) to encourage spending -> Growth -> Rising inflation (better oil prices) -> Rising rates (higher bank lending charges) -> Less spending -> Recession


This particular cycle has gone on much longer than usual – inflation and rates are showing signs of rising, but there may still be deflationary factors (like technology) .. If the market knew what was going to happen next, cyclical stocks would already have recovered (because we price based on the known/expected future).

So as Sara says: if you sell now, you might have just bought the downturn, and sold before the recovery .. Very possible.

However .. my instinct is that most people shouldn't play that game at all .. You could be waiting another 10-20 years for the recovery .. When you say things like "100% down"; the fact you've been in the market this long without having read about market cycles, defensives, staples, etc.; I can spot someone who shouldn't be trading stocks.

When you realise you've made a mistake: just get out and cut your losses – work out what you did wrong; write it down; don't do it again .. Unless you really have a sudden urge to learn deeply about stock markets, you should undoubtedly just buy a Vanguard global market tracker, or Vanguard Lifestrategy 100 .. It's such an easy decision .. You own the whole market; and you never need give it another thought

2 users thanked King Lodos for this post.
Alan M on 08/05/2018(UTC), Road-Man on 13/05/2018(UTC)
DanBRK
Posted: 08 May 2018 08:19:15(UTC)
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It sounds like you would be better off putting your money in a fund which tracks the market.

You don't have to make your money back the same way you lost it. I agree that the next few years look brighter for both stocks than the past few but there's so much more to consider with individual stock picks. Out of the two I would rather hold BP but given the choice between the two stocks and a Vanguard global fund I would definitely choose the fund. If you are making individual stock picks then you need to be owning more than two otherwise you are far too exposed.

I think you need to determine whether you are in it purely to make money or because you also enjoy researching companies and following the markets. If investing isn't something you particularly enjoy doing then it's best to stick to passive investing.

All the best.
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King Lodos on 08/05/2018(UTC), Road-Man on 13/05/2018(UTC)
AnthonyL
Posted: 08 May 2018 08:35:49(UTC)
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Usually by the time I've realised an investment has dived it has become a good buy so too late to sell it.

BP has paid out about 5% consistently even through all the troubles.
Vector 7354
Posted: 08 May 2018 09:04:54(UTC)
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Thanks guys for your collective thoughts.

I'm going to stick with BP. As for BARCLAYS I've waited since 2005 so will hold them for now. I do though like the idea of the Vangaurd Global so will keep that in mind.
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Sara G on 08/05/2018(UTC)
King Lodos
Posted: 08 May 2018 14:25:47(UTC)
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General comment:

As a trader, when you've made a mistake, you get out .. It's behavioural as much as anything.

You look at your open positions every day, and ask yourself if there's a single one you wouldn't open today (because, £5 dealing charge aside, that's effectively what you're doing every day – reopening all your positions).

The idea there's *stickiness* to having bought a stock or fund – the crazy idea you can 'crystallise' a loss – is doubling down on a mistake .. Not that your luck can't change, but if you're that person, you will always find yourself in these problems.

What defines you as a trader or investor isn't that stock you're holding .. It's your behaviour .. Behaviour's the one thing you've got control over .. The lessons are applicable to all aspects of life – you don't want to be at the whim of "let's wait and see" or "hold and hope" .. Big difference between a gambler and a trader: a gambler judges themselves on outcomes; a trader on behaviours .. Outcomes are random – that's why there aren't many wealthy gamblers
5 users thanked King Lodos for this post.
Keith Cobby on 08/05/2018(UTC), Sara G on 08/05/2018(UTC), kWIKSAVE on 08/05/2018(UTC), Alan Selwood on 08/05/2018(UTC), Road-Man on 13/05/2018(UTC)
Keith Cobby
Posted: 08 May 2018 14:40:20(UTC)
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Good comments from KL. I look at my holdings each day and ask myself if I had new money to invest would I add to a holding. If I wouldn't add new money I sell. I no longer 'hold'.
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King Lodos on 08/05/2018(UTC), kWIKSAVE on 08/05/2018(UTC), Road-Man on 13/05/2018(UTC)
kWIKSAVE
Posted: 08 May 2018 15:56:52(UTC)
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Great comments guys.

So true ; thinking of adding to existing ISA holdings but only those that have done well and why not ?
Alan Selwood
Posted: 08 May 2018 16:50:18(UTC)
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I try to prune out the good ideas that weren't.

I then try to invest the proceeds in those that have done well, or new ones that look more promising.

I will keep good ones and add to them until the sheer size makes me think : "After that good run, would I be happy to concentrate risk to this extent in this holding?" Then I stop adding, or prepare to reduce until my comfort zone is re-established.
King Lodos
Posted: 08 May 2018 17:18:37(UTC)
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Well *at some point* there'll presumably be another great rotation – from all the things that have done well, into all the cyclicals.

Lindsell Train mention it would likely lead to funds like theirs underperforming against indexes like the FTSE 100, and these cycles can be 14-15 years, the up and the down (if history's anything to go by .. which it may not be).

You can see it in the track records of Michael Lindsell and Nick Train:
https://www2.trustnet.com/managers/factsheet/michael-lindsell/ima-utoeic/O/00000077PO/
https://www2.trustnet.com/managers/factsheet/nick-train/utoeic/U/00000287DW/

It would likely be the same story for Fundsmith .. Average or below average performance from 2000-2008, then runaway performance after the Financial Crisis.

So when the stories come up asking 'Have LT/Fundsmith lost their touch?' .. probably not .. It's just the market sometimes favours cyclicals.

And then the question is: do you try and catch the rotation, or do you use the opportunity to buy quality stocks at better prices? .. Retail fund managers are unlikely to rotate, as it's very easy to get it wrong .. It's why I only think of them as semi-active.


1 user thanked King Lodos for this post.
Road-Man on 13/05/2018(UTC)
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