SHARE EXPERIMENT (PWs)

At no time in recent years have we seen so many companies warning on future earnings. None of us can know for sure how shares subject of PROFIT WARNINGS (PWs) will perform after the collapse. I therefore intend to conduct empirical research to evaluate a buy and hold strategy of the 30 stocks over 6 months.

I have set up a spread sheet with a nominal purchase of 1000 shares in each of the 30 companies based on the closing share price on 5th January, 2001. The total cost is £38,341.20.

I will post a weekly update of the number of shares that rise, the number that fall and the total value of the potfolio. Of course this exercise is paper based so no one will win or lose money but it does have the potential to identify some opportunities.

I will carry out a more detailed analysis after three months on 5th April 2001 and 6 months on 5th July, 2001.

If anybody wants a copy of the spreadsheet then please ask and I will send it.

I WILL ALSO CONTINUE TO MAINTAIN RECORDS OF ALL COMPANIES WHO ISSUE PROFIT WARNINGS IN MY DATA BASE. CAN I ASK THAT YOU ALERT ME TO ANY FUTURE PWs ON SHARES IN LONDON MARKET. IF ANYBODY NEEDS THE LIST THEY ONLY NEED ASK AND I WILL E-MAIL YOU.

This I feel is the safest way rather than posting lists on this site which could cause upset and lead to litigation if we get details wrong.

If members would like to forecast the value of the portfolio in three months and 6 months that will add a level of interest to the proceedings. In addition, I will try to alert members to any share that looks like stageing a recovery. What do you think?

Tx

[This message has been edited by traderx (edited 08-01-2001).]

That's gonna make interesting reading......

Martin

Traderx, this is excellent work - thankyou for taking the time out - I am certain the results will be facinating. Will keep a look out for furhter PW's.
Mark

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Glad to be first in....BAE down 25% so far today.
Mark

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Hi Mark,

I got in ba. at 258..looks overdone to me..

rizgar

Add Blacks Leisure (BSLA) to the list.

Poor trading statement today. MM's decided to slash by 35% at open - 80 points.

Overdone ???

To date company boasts a P/E ratio of just 6 and average growth of approx 17%


Cookie

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Add MTN 43% after fall in margins.
LNB gave PW today - price dropped by 22% initially, now recovered to -12.5%
MArk

WEEKLY UPDATE W/E 12/1/00 (30 STOCKS)

AAT 285 +1.2%
ACC 31 -12.7%
BVC 124 +8.7%
CHTR 124 14.1%
CLA 97.5 -2.5%
CSV 57 -1.7%
DUC 21.75 +2.75%
ETE 71.5 -6.5%
EXI 97.5 -.5%
FRH 28.5 -18.6%
FUR 61.5 -26.8%
HRR 82 -5.2%
ISL 80 N/C
ISYS 173 +8.1%
KSS 271 N/C
LCI 58 3.6%
MNGS 121.5 -0.82%
PHTM 89.5 -11.8%
PLM 115 +5%
PON 266.5 +3.9%
QSG 24.5 N/C
RR# 201.75 -0.1%
RTN 36.5 -2.7%
SEM 355 +37.6%
SOH 15 +9%
SSL 507 -4.8%
TRK 160 +60%
TSP 67.5 -1.5%
VDY 265.5 +4.1%
WGG 28.38 -0.8%

VALUE OF PORTFOLIO £39,828.80
TOTAL GAIN/ LOSS WEEK £1487.60 +3.88%
CUMULATIVE GAIN 3.88%

STARS
BVC, CHTR, ISYS, PON, SEM, TRK, VDY

DOGS
ACC, ETE, FRH, FUR, PHTM

With a stock picking approach this could be lucrative, identifying the stars and avoiding the dogs. The thing I have noticed is that, when a stock starts to recover it often climbs rapidly for a short but profitable rally, usually on good news. Example TRK after strong rumours that they are close to a deal with Ford. +60% BINGO

Tx

Trader.........Hope you keep this thread running on the new BB from Monday.

I have copied the list just in case.

All threads will be automatically and transparently converted so no worries there.

Martin

WEEK TWO CHANGES W/E 19/1/01

AAT +0.35%
ACC -3.23%
BVC +37.1%
CHTR -1.3%
CLA -10.3%
CSV -12.3%
DUC +12.6%
ETE N/C
EXI 4.1%
FRH +10.5%
FUR N/C
HRR -1.2%
ISL +43.75%
ISYS +4%
KSS -0.4%
LCI -1.7%
MNGS -9.5%
PHTM -10.6%
PLM +1.3%
PON +23.8%
QSG +-18.3%
RR. +1.2%
RTN N/C
SEM +9.3%
SOH +33%
SSL -2.2%
TRK +6.25%
TSP +6.7%
VDY +6.8%
WGG +5.3%

Total weekly gain = +£1780.00 (+4.64%)

CUMULATIVE WEEK TWO TO DATE

TOTAL PORTFOLIO CASH GAIN = £3267.60 (8.5%) based on holding 1000 shares in each stock (2 weeks)

Cumulative losses (cash / %) to week 2

DOGS
ACC -£55 (1.6%)
CLA -£125 (12.5%)
CSV -£80 (13.8%)
ETE -£50 (6.5%)
FRH -£35 (10%)
FUR -£225 (26.8%) OUCH
HRR -£55 (6.4%)
KSS -£10 (0.4%)
MNGS -£125 (10.2%)
PHTM -£215 (21.2%) OUCH
QSG -£45 (18.3%)
RTN -£10 (2.7%)
SSL -£365 (6.85%)

TOTAL DRAWDOWN £1395.00 -3.63% (based on total cost of original portfolio)


Cumulative gains (cash /%) to week 2

STARS
AAT +£45 +1.6%
BVC +£560 + 49%
CHTR +£210 + 12.6%
DUC +£32.50 + 15%
EXI +£35 + 3.6%
ISL +£350 + 43.75%
ISYS +£200 + 12.5%
LCI +£10 + 1.8%
PLM +£70 + 6.4%
PON +£735 + 28.65%
RR +20 + 1%
SEM + £1300 + 50.4%
SOH + £62.50 + 45.5%
TRK + £700 + 70% (STAR OF THE SHOW)
TSP + £35 + 5.1%
VDY + £285 + 11.2%
WGG + £12.60 + 4.4%

TOTAL GAINS £4662.60 +12.16% (based on total original cost of portfolio.


Tx

[Edited by traderx on 20-01-2001 at 12:25 AM]

I think it might help to do some analysis at this point. Although we are only two weeks into the experiment and in fairness, it is too early to draw significant conclusions, I have observed one important factor which is already beginning to emerge.

The total down-side risk thus far is £1395 (3.63%) versus the upside gain of £4662.60 (12.16%), leaving a nett gain excluding dealing costs of £3267.60 (8.52%)

The interesting point here: The upside potential is more than 3 times greater than the downside. WHY IS THIS? Because these shares, as we know were each subject of a profits warning and the price collapsed. Having lost up to 50% of value it appears that the downside risk of this portfolio MIGHT be less than another portfolio of stocks chosen at random, and (not subject to a profits warning). In other words there is more upside potential than downside (AS A PORTFOLIO) because some of these stocks are sound companies and WILL recover.

Moving on from there, if the investor targets those stocks that show signs of recovery (STARS) and ignores those that lose or remain static (DOGS) then the strategy might work. Only time will tell. One swallow does not maketh a summer, or in this case two swallows (weeks. We should not lose sight of the risks. Sometimes companies warn on earnings for a second time and then the gains could be eroded. Remember, the greater the risk the greater the potential gains but the greater the chance of losing your shirt.

Disclaimer
This is an experiment for research purposes only and visitors to this BB, indeed our own members are respectfully warned of the high risks involved. Do not try this at home!

Tx

Unique contribution

A unique contribution, traderXXX. I am glad the idea is gaining momentum.

Old one, but worth adding

TX, CHB fell dramatically in December after issuing a statement about "lower than expected" sales in Australia. Fell from 200+ to as low as 140.

Don't panic

It appears to me that this experiment ties in to something that we all know happens when bad news comes out. Ordinary, rational people PANIC. And hence the price drops well below what it should. What an excellent thread and good work by TRADERX.

Excellent

Traderx - fascinating stuff. One company not on your list ITnet. Following its collapse, it has risen 70%+ over last month. Obviosly this is a contrarian, risky strategy, but I agree, following a collapse, there is a greater chance of upside than down. I am fascinated to see how this experiment progresses.....
All the best,
Mark

Re: Excellent

Hi, first time on this board. Glad to see some names I recognise from CI.
Jumped in and out of Matalan and just got in Iceland. Made some on MTN, Jury's still out on ICE, but here's hoping. Do these qualify for your watchlist? Great idea, Traderx.

UPDATES FOR W/E 26TH JANUARY 2001

EPIC % GAIN

AAT +14%
ACC -10%
BVC -4.4%
CHTR -4.5%
CLA -65%
CSV -2%
DUC +1%
ETE +0.7%
EXI +0.5%
FRH +12.7%
FUR 0
HRR +6.2%
ISL -5.65%
ISYS +3.75%
KSS -0.37%
LCI +4.39%
MNGS -16.36%
PHTM -3.13%
PLM +15%
PON -20%
QSG -2.5%
RR -1.96%
RTN 0
SEM -2.58%
SOH -7.5%
SSL -2.42%
TRK +13.83%
TSP -5.56%
VDY 0
WGG -0.87%

VALUE OF PORTFOLIO £40,768.70
WEEKLY LOSS -£840.10
WEEKLY LOSS % -2.02
CUMULATIVE GAIN £2,427.50 (THREE WEEKS)
CUMULATIVE GAIN % 6.33%

UPDATES W/E 2ND FEBRUARY, 2001

AAT -0.46%
ACC +3.7%
BVC -12.6%
CHTR +2.8%
CLA +14.75%
CSV -9.18%
DUC -7.07%
ETE -2.78%
EXI +0.5%
FRH -8.45%
FUR +26.83%
HRR -12.79%
ISL +0.46%
ISYS -4.15%
KSS -3.35%
LCI -3.36%
MNGS +22.28%
PHTM +46.45%
PLM -0.37%
PON -15.7% further profits warning
QSG -5.96%
RR# +1.25%
RTN 0
SEM 4.5%
SOH 0 (suspended)
SSL +3.725
TRK -11.37%
TSP -2.2%
VDY +4.59%
WGG -1.25%


Value of portfolio £40,807.50
Weekly gain £38.80
Weekly gain % 0.10%
Cumulative gain £2,466.30
Cumulative gain % 6.43%