This made me chuckle, which from below would prove a most profitable investment since a year and a half ago:

  • Delta Airlines
  •  AIG insurance company
  • Lehman Brothers
  • Northern Rock
  • Buying and drinking beer

Lessons in Investing

Buying miners

What i’ve learnt

  • Firstly, help yourself to a large dose of scepticism. Seriously. Small mining companies and explorers seem to constantly over exaggerate potential, timescales and underestimate costs. This leads to the market being dissapointed and confidence in the company reduced. It also leads to cost over runs, running out of cash and having to refinance/take on debt/issue more shares – all bad news for shareholders.
  •  Explorers are speculative, with timescales being in years before a mine goes through all the required tests and gains the required permissions.
  • There are mega caps like Rio Tinto (more correlated to global output/need for raw materials)and there are of course tiddlers with perhaps one mine somewhere they are pinning their hopes on.
  • Miners are correlated with commodity prices. if the company mines copper, then expect its share price to correlate to the price of copper over time.
  • Finally i have found some interesting looking miners, only to later discover some complex and confusing financial arrangements that exist where profit or assets are shared/split/part owned by another entity. Far too confusing for anyone other than an expert and often the financial arrangements may be hidden in RNS stories from way back.

There is an interesting article over on Investors Chronicle about mining companies and how such a small % are successful.

In summary, i’d have to have some very compelling reasons to invest in small miners. Hopefully i’ve dampened any mining risk taking tendencies you may have – just as i did(do!). It’s far to had to judge the risks and potential rewards unless you are experienced in this sector. My only mining position ever is Frontier Mining who i believe are priced cheaply due to poor expectations management/communication with shareholders. They are just starting to produce and i’m hoping i bought in on a low with plenty of upside as they increase (hopefully) production. I couldn’t find any nasties lurking but you never know…

I bought some Indigo Vision shares yesterday after looking for an opportunity to buy since their large increase in price over the last month or so – due to their very positive trading update and announcement of a special dividend. Today is the ex-div date for their special dividend of 70p. I had wondered if the share price would drop by more than the dividend, the exact amount, or less. I hoped for a drop of less obviously or a bounce but it turns out the share price has dropped by just under 80p! This means that had I waited and bought today I would have saved 10p / 411.57p = 2.4%

Perhaps for the majority of buyers the tax liability on dividends works out less than the capital gains of selling before the dividend.

Never mind, my curiosity has been satisfied and I’m more than happy to hold this company given its optimistic outlook .

First Post!

October 31st, 2012 | Posted by shauniekent in Uncategorized - (0 Comments)

I’ve been thinking about getting this up and running for a while and I finally got here. I hope to make regular updates. I’ve got lots of interesting things to share and I will be tagging my posts extensively so useful content is easy to find. Let me know if it’s any good! Share Bear!