Private Investor: Right move at the right time has paid off

Click to follow
The Independent Online

You can't argue with a 40 per cent return in six weeks. And most of the rise, at any rate, on the basis of fundamentals. Had you followed me into Rightmove at the end of November, you too might have seen your shares rise from 325p to 460p.

It's even better when you consider what I might have done with the money instead - stuck with ITV. Shortly after the news of BSkyB's acquisition of a blocking stake in the television group, I took the view that they wouldn't do anything but stagnate, and thrashed around for something a little more growth-oriented.

Without any great nous, I'd noticed the way that some internet companies have not only survived the bursting of the dot.com bubble but prospered to such a degree that they've practically got a stranglehold on their chosen part of the market. Think of the ubiquitous Google or the seemingly unstoppable eBay. To me, these companies are the Standard Oil, or the AT&T, or the Microsoft, you might even say, of our times. However, they have reached those positions in an environment that is more open and has lower barriers to entry than pretty much any old traditional industry.

Setting up a car company or a shipyard or even a software house clearly requires plenty of capital. Setting up an internet auction site is comparatively easy. Why incumbents such as eBay seem so well dug-in is a bit of a mystery to me. As I wrote at the time I bought the shares, Rightmove, it strikes me, is well on the way to becoming a monopoly marketplace in the UK residential property market. As a recent consumer of the service, I found it worked extremely well, which is usually enough for me to put money into a company (it's harder than it looks just to make a website work).

Even if there is a property slump, Rightmove should still be a growth story because of the structural change that is going on in the residential property market, ie the migration of advertising from traditional media to the web. Thus around 15,000 estate agents, rental agents and new-home builders are signed up to the property website, paying an average subscription of £181 per office, per month.

The Rightmove story is complicated because about a fifth of the shares are owned by the Countrywide chain of estate agents, which is in the middle of a rather tortuous management buyout. Maybe this, and the takeover valuation of websites similar to Rightmove in the United States, has focused some attention on the stock, but, as I said at the top of this article, much of the upward progress in the share price has been based on ever more upbeat trading statements and ever more optimistic brokers' notes on the shares.

I certainly expected Rightmove to move in the right direction, but not quite as rapidly as it has. Perhaps the shares have outrun their true worth right now, but who can tell? All the multiples quoted on the stock - 81 is the usual prospective p/e, I think - are fairly notional. No one can really tell how much more meteoric growth is left for Rightmove, how precisely a slowdown in the housing market might affect things short-term, and whether any new entrants might mess the pitch up.

The thought does strike me, however, that some of the valuations placed on the dot.coms at the height of that boom six years ago might actually prove a little too pessimistic in the fullness of time.

I'm also more than delighted with the recent revival in the British Airways share price. Who'd have thought that this dear old flag-carrier would be able to weather terrorism, bird flu, oil price inflation, strikes, budget airlines, and countless other commercial threats, to be flying quite as high as it is now? The sad, worrying thing is that some of the recent boost to the share price has come because of takeover speculation. So, yet another of my prime assets may be about to be bought by some private equity consortium. We should get a grip on this.

Apologies, by the way, to readers, especially north of the Border, who rightly spotted that we'd placed the wrong photograph over this column last week. My fault, as I thought that the magnificent bank HQ that I'd recently spotted on a trip to Edinburgh was the Royal Bank of Scotland, whereas it was in fact the Bank of Scotland. A schoolboy error. Sorry again. Next time, I'll find a tour guide

s.ogrady@independent.co.uk

Looking for credit card or current account deals? Search here

Comments