Private Investor: Sometimes it really does pay to invest in a basket case
Saturday 16 April 2005
I'm afraid that I am such an optimistic mug when it comes to the British motor industry that I would have bought shares in MG Rover.
I'm afraid that I am such an optimistic mug when it comes to the British motor industry that I would have bought shares in MG Rover. If the whole company cost £10 when the Phoenix Four bought it from BMW five years ago, I would have been quite happy to chip in 50p or so to make me a significant minority shareholder in the enterprise. I might even have got a discount on a new Rover or MG car.
Actually, there might have been a slightly more serious opportunity for the chaps at MG Rover/Phoenix to have offered shares to the public in 2000, on the clear understanding that punters would have been welcome to invest, only if they fully understood the overwhelming probability that they'd never see their money again.
There are patriots out there and, as I say, optimistic mugs such as me who might have put a few quid into it.
It could have made a slight difference - you never know - and given that the new car was only £80 million and 10 months away from launch, it might have saved the show. Well, it would have been worth a shot, but the interests of the Phoenix Four would no doubt have got in the way.
Sometimes, though, it pays to invest in apparent basket cases. I'm kicking myself that I didn't buy into Avis, the car rental group currently enduring problems, when it was at 50p. Now it's up to 72p or so. I missed that particular race.
However, I was lucky enough to put some money into Reuters at the nadir of its fortunes, two years ago, and this has proved a highly rewarding punt. I bought in at an average of 247p and shares now stand at 425p, somewhat off their peaks but still a satisfactory run.
Now, according to some brokers' gossip that I've read in the press, Reuters' trading statement next week will be a more upbeat affair than had been expected, with subscriber numbers ending their long progress downwards, as confidence and business returns to the City. Credit Suisse, First Boston and Morgan Stanley are all bullish on the stock, so something may well be afoot.
Tom Glocer seems to have done a good job in stabilising Reuters' position and attacking the cost base, although that will have been painful to those affected by that sort of euphemism for the sack. But the mess of systems and products that Reuters had lumbered itself with was an equally difficult problem, and here again Glocer has acted. The new Reuters Trader product is reported to have had a successful launch. Bloomberg has made life much more arduous for Reuters in the past few years, but the fact that Reuters has managed to survive as well as it has done is something of an achievement.
Reuters has come a long way since it was owned by a consortium of newspaper publishers. It was floated in 1984 and the huge proceeds from that sale helped to pay for the investment and for the relocation of a number of our Fleet Street (as was) newspaper titles.
I doubt that that sort of windfall will be falling on shareholders again very soon, but I reckon Reuters is a solid hold on the back of its recovery so far.
Also a definite continuing hold is Sportingbet. A little-noticed clause in the Gambling Act, much mauled as it is, makes it explicitly legal for UK firms to accept internet bets from US citizens (while it remains illegal under American law for American firms to do the same). I also see that the World Trade Organisation has told the Americans to stop trying to prevent their citizens placing online wagers with overseas firms. So that means that, in the short run at least, things are going to continue to go Sportingbet's way.
I do worry, though, about what will happen to Sportingbet and its peers if the US liberalises and lets Microsoft into that market. Stay lucky.
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