Private Investor: Without money, I'll just have to grin and bear it

Meet ultra-bear. That's me. The economic news that we've seen in the last week fills me with dread.

So, ultra-bear, what's to worry about, you may ask, as I get ready to hibernate?

It's like this. Input inflation is up, thanks to higher food and energy prices, in turn driven ever higher by the voracious demands of the Chinese. That will, in due course, lead to higher prices in the shops, but maybe not that much higher given that we're all still looking for "value" on the high street (and online), and wages growth looks fairly muted.

What may well happen, then, is that profits will get a bit of a squeeze; margins are what's going to give, even if wages aren't markedly higher.

As it happens, I think that this will be especially true of retailers, who have a tough enough job as it is. Sure, the strong will no doubt survive, and are worth a punt, but the e-retail sector as a whole is going to have a difficult year, as even their most bullish spokespeople admit.

Obviously, the housebuilders are coming under fire, and the banks are a long way from being out of those bear-infested woods. However, the bad news on the economy and profitability may well lead to some outstanding buys as share prices massively undershoot their true value, even taking all the bad news into account.

As I say, banking and retailing are probably still worth avoiding for now, but I wonder whether the housebuilders and the commercial property sectors are worth a look.

Before going any further I have to declare that by far my favourite play in this field is Savills. You may know it as a posh estate agent, which it is, but you may not realise the extent to which it is geographically diversified, nor that it has moved into the wonderful world of wealth management as well as shifting expensive real estate. Apparently, property planning and valuation consultancy, fund management, financial services, and property management contribute about 40 per cent of Savills' operating profit and should add an element of stability to the business.

The shares are trading at three-year lows and are down about a half on where they were last year, and the value of my holding and my paper profits have collapsed in line. No matter, I started buying Savills a decade ago and have been adding ever since, regarding the current travails as reasons to top up my holdings still further.

But why would an ultrabear want to buy into such a group, with its massive exposure to the finance sector, via those City bonuses and Wall Street salaries?

Well, I have a very strong feeling that, like the poor, the super-rich will always be with us, and that they will always be on the lookout for a nice spot to park their weary backsides: they're not all City traders. Savills has a good presence in most of the locations that these types favour, globally, and, importantly, has a decent exposure, via Hong Kong, to the growing class of Far Eastern billionaires. They may well be relatively unscathed by the slowdown in the West, and will help to keep Savills turning over good business in that part of the world.

Even in London, at the top end, property prices seem to be relatively firm. After all, not many £5m townhouses go to sub-prime borrowers. Even so, the market is right to the extent that Savills will undoubtedly be hurt by the credit crunch and profits will be more depressed than they would otherwise be. The point is that the long term growth story at Savills remains sound and it is more than possible that the markets have overdone their pessimism about this particular stock. Certainly it has bumped off the bottom after a sharp correction seen last month.

It will be a tempestuous ride, as the trends in the real estate market – especially commercial property – may well be amplified in Savills' share price. However, I'd be very tempted to buy, if I had the liquid funds to do so.

In fact, I wouldn't be that surprised if some bank wasn't in the same position as me: thinking Savills a bargain, but unable to lay their hands on the cash to make good the deal.

Thus I find myself in the frustrating position of knowing what I want to buy but not being able to fund my ambitions. If I could, I'd also buy into Rightmove, an excellent "secular" growth tale, and would advise you to do so if you have any spare cash. Unusually, patience is a virtue that doesn't come easily to this bear.

s.ogrady@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Sport
Laura Trott with her gold
Commonwealth Games
Arts and Entertainment
Gal Gadot as Wonder Woman
film
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
Extras
indybestSpice up your knife with our selection of delicious toppings
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Training/Learning and Development Coordinator -London

    £28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

    Training Programme Manager (Learning and Development)-London

    £28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

    .NET Software Developer (.NET, C#, ASP.NET, front-end)

    £30000 - £45000 per annum: Harrington Starr: A Global Financial Service Organi...

    C# Web developer (C#,MVC,ASP.NET,SQL)

    £30000 - £40000 per annum + Bonus+Benefits+Package: Harrington Starr: C# Web d...

    Day In a Page

    A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

    A new Russian revolution

    Cracks start to appear in Putin’s Kremlin power bloc
    Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

    Apartheid’s sadistic killer that his country cannot forgive

    The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
    Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

    Standing my ground

    If sitting is bad for your health, what happens when you stay on your feet for a whole month?
    Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

    Greene prays for chance to rebuild after injury agony

    Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
    Israel-Gaza conflict: Secret report helps Israelis to hide facts

    Patrick Cockburn: Secret report helps Israel to hide facts

    The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
    The man who dared to go on holiday

    The man who dared to go on holiday

    New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

    The Guest List 2014

    Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on
    It's the best of British art... but not all is on display

    It's the best of British art... but not all is on display

    Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
    Critic claims 'I was the inspiration for Blanche DuBois'

    Critic claims 'I was the inspiration for Blanche DuBois'

    Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
    Sometimes it's hard to be a literary novelist

    Sometimes it's hard to be a literary novelist

    Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
    Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

    Edinburgh Fringe 2014

    The comedy highlights, from Bridget Christie to Jack Dee
    Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

    Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

    The woman stepping down as chair of the Heritage Lottery Fund is worried