Investing on the Stock Market

Worthing Gooner, Going Postal
The London Exchange.
London, England, Andre ZehetbauerLicence CC BY-SA 2.0

I wouldn’t ever call myself a professional investor far from it, I am a real amateur. I have had one or two successes and some real flops but in general, I have made more than I have lost and had a bit of fun on the way. This article is not to be taken as a suggestion to buy or sell any share or financial instrument and it’s by no means a guide to investing, it’s just the story of how I came to dabble in the Stock Market and some of my mistakes and successful purchases.

As some of you may have learnt from other things I have written, when I left school I went to work for Babcock and Wilcox. Several name changes later they were called Babcock International and they decided to launch a Staff Share Saving Scheme. I don’t know if these schemes are still around, but they proved to be fairly popular in the 1970s and ’80s. The idea was the company created new shares at the current market price which were held in the company treasury. Employees were encouraged to take out a National Savings ‘Save As You Earn’ contract and the proceeds could be used to purchase some of the new shares at the issue price when the SAYE contract finished. Of course, if the price of the share went down you just walked away with your savings and didn’t buy the shares. It was a win, win for the employees.

I took out an SAYE contract for £10 a month. At the end of 5 years, you got an extra year in payments as a bonus, so I was to get back £720. I can’t definitely remember the striking price of the share but I seem to remember it was 48p each so I was entitled to buy 1500 shares when the contract was up. However, if you left the SAYE contract untouched for two years the bonus was double so I could buy 1750 shares. But in our case, this didn’t happen as intended.

Worthing Gooner, Going Postal
£10 a month.
£10 notes, Images MoneyLicence CC BY-SA 2.0

About two years into the SAYE contract Babcock announced that they were going to sell out to a company called FKI Fisher to form FKI Babcock. FKI were paying for Babcock with their shares and this meant that my entitlement to Babcock shares became an entitlement to FKI Babcock shares and the number suddenly doubled!

Two more years went by and Babcock was floated off from FKI Babcock to become Babcock International Limited. As an employee of the new Babcock, I was not entitled to purchase FKI shares when the SAYE contract ran out. So as part of the float, FKI had to buy back my entitlement to 3000 shares I didn’t own! I got a cheque for about £3,500. My Dad was sure something was wrong and expected the fraud squad to turn up. I just bought my first car. But I hear you say what about the SAYE contract? Well, that was still mine so about a year later I got a cheque for £720, I didn’t want to hang around for another 2 years to get the double bonus. I decided that I would use that money to do what I originally intended and buy shares in Babcock and that is how my shareholdings started, with a purchase of 1500 Babcock International shares.

Of course, many things have happened over the years, the Babcock shares have had their ups and downs, they had a one for three repurchase, I have reinvested dividends, bought a few more here and there, I have even taken profits. However, I have retained my core holding and they have rewarded me well.

Then Maggie Thatcher and started the privatisation of public companies. Initially, I was not brave enough (Rolls Royce, British Aerospace, Cable and Wireless) but then along came the British Gas “Tell Sid” campaign and I was tempted.

That went well so I also bought into the sales of electricity, water, National Grid, BT and Railtrack. I missed out on Brit Oil. I think all made me money until Labour ripped the shareholders off over Railtrack and some like National Grid have been fantastic investments (5 Bagger).

I used to get up early for work and listened to the radio program “Wake up to Money”. One morning they were chatting about Mears, who were a service company, mainly maintaining houses for local authorities. I decided they may be worth a gamble so I jumped in with a purchase. Thank you BBC my holding has become a 3 bagger (tripled in price).

I now had a load of Paper Share certificates and following the “Big Bang” we were all being encouraged to go electronic. I hated the idea of having thousands of pounds in certificates in the house so I started looking for a safe home. Several stockbrokers offered a service that converted your certificates to an electronic holding that you could access over the internet to buy and sell. I landed on Charles Schwab who had a few features I liked. They offered auto reinvestment of dividends if you wanted it. They were fully automated for buying and selling online, although you could buy over the phone if you wanted. They had a monthly standing order system where you could pay in a fix monthly amount to save for future share purchases, but if you wanted to spend more than your savings balance you could spend up to the total amount you had in shares and pay up by the settlement date.

Charles Schwab’s British operation was subsequently taken over by Barclays Stockbrokers who are now Barclays Smart Investor. Some people hate the new systems brought in by Barclays but I have never had a problem with it. All the old features are there and it is now integrated into my Barclays Bank Online Account and mobile phone App meaning I can check my holdings on my iPhone in seconds (up 0.7% since I started writing!).

Worthing Gooner, Going Postal
Barclay’s Bank.
Barclay’s sign, Paul WilkinsonLicence CC BY-SA 2.0

When the 1986 budget introduced Personal Equity Plans my Father bought one for my brother and myself. If I remember rightly, he invested the legal annual maximum of around £2000 for each of us. The beauty of a PEP was that it was a tax-free saving vehicle. The original PEPs were managed investment plans and the money was spread around holding in several companies. It was a long time ago and I can only remember that Shell was one of them. Over the year this grew and became a welcome nest egg that I knew was always there if I needed to put my hands on some cash. Much to my dads disgust my brother sold his!

PEPs were fazed out years ago and those, like mine, that were still around were converted to ISA’s. On conversion, whatever value the PEP had was transferred into a Unit Trust ISA and frozen to new investments, except for the reinvestment of dividends. Like an old PEP, ISAs are tax-free investments with a fixed maximum annual investment. These days you can invest your annual allowance in either a single company ISA or into a Unit and Investment Trust ISA but only one a year. My original PEP/ISA is still going and has proved a marvellous investment, my Dad would have been delighted to think that it is now valued at many many times its original investment.

I have always been of the opinion that you don’t put all your investment eggs in one basket. So I have diversified my shareholdings into a number of different companies in a wide range of sectors. I have shares in engineering, banks, services, pharmaceuticals, betting, supermarkets, meat production, oil, telecom, etc. I also have holdings in a couple of investment trusts and another unit trust ISA.

But back to shares. My investing has not always been successful but when taking a punt on a company I tend to divide my investments into either companies with a proven track record and decent dividend payments (say Shell) or out and out gambles were I may put in £1000 but and count it as lost. If that gamble comes off great, if it goes tits up well that’s OK as I had already written the money off. I have a strict rule when it comes to this type of investment, I never lay out more than I can afford to lose. One such investment was in a company called Torotrac. They had developed a revolutionary automatic gearbox that saved a large amount of fuel and was a really interesting bit of engineering. In the end, the motor industry was just not brave enough to adopt the gearbox. It was tried out by numerous manufacturers including Volvo, Ford and Toyota but although it passed all their tests no one wanted to be first and the company went under. What I learnt from this investment was to invest with your head and not your heart. I liked the product too much and never really evaluated its chances of being a success.

On the other hand, a gamble sometimes pays off. I read an article about a company called Cranswick who are pork processors. The article wasn’t pushing shares it was just talking about the company who raised and butchered pigs in the U.K. and then turned them into products for Supermarkets. They produced quality bacon, sausages, pies and pork joints, all for Supermarkets top of the range own brands. Near the end of the article were a couple of throwaway lines that put me on alert, they were branching out into chicken and building their own processing plant and they were dipping their toe in the export market to China. I short while later I read that China had a problem with an endemic pig disease and China was having to up their imports to meet the huge demand for China’s favourite meat, pork. Putting two and two together I invested in Cranswick and it is looking good.

Worthing Gooner, Going Postal
Free-range pigs.
Free-range pig farm, Vieve ForwardLicence CC BY-SA 2.0

Sometimes you just happen to be in the right place at the right time. When I inherited a holding in Investec I had no what they did or anything about them, I just tucked the holding away in my Smart Investor account. A little later I check my account and found that I had suddenly got over 300 shares in a company called Ninety One plc. A bit of digging later and I discovered that they were an asset management company and had been floated off from Investec. I had just been given £500 worth of shares I knew nothing about!

About 9 months ago I had a bit of cash in my Smart Investor account and decided that it would be better invested in shares than earning nothing as a cash holding. I was a bit light on pharmaceutical and selected AstraZeneca as a safe bet. How was I to know they were going to get involved with the Coronavirus Vaccine and my holding was to leap 18% in the last few weeks.

Please don’t ask me for share tips, I do my research and take my chances or sometimes back a hunch. I am fortunate to have built up a decent portfolio which was supposed to be there in case I needed it in my retirement. Luckily I have a couple of good pensions and I haven’t had to fall back on investments, instead, I have continued to be able to save. Profit-taking has allowed me to buy several new cars and have foreign holidays and not touch my core holdings while enjoying being an amateur investor.

If you are a fellow dabbler in the Stock Market I wish you good fortune.

©️ WorthingGooner 2020

The Goodnight Vienna Audio file