This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.
The Beginners’ Portfolio is a virtual portfolio, which is run as if based on real money with all costs, spreads and dividends accounted for.
I started taking notice of Quindell (LSE: QPP) when the insurance outsourcing firm was hit by a negative report (written by someone with a material interest in Quindell’s share price falling) followed by a short-selling attack.
That killed the soaring share price, and things turned down even further when Quindell’s attempt at a main market listing on the London Stock Exchange was knocked back. It wasn’t due to any real shortcomings of the company, but the LSE’s rules require a stable period of three years for a company to qualify — and Quindell has been growing massively, largely by acquisition, and cannot yet show that stability.
The firm was perhaps a little naive, but that’s all.
No main listing
We’ve recently heard of moves to spiff up Quindell’s corporate governance with a longer-term view to another go at a main listing. That has started with the split of the chief executive and chairman roles, and we should be seeing new non-executive directors appointed to the board later in the year.
There are no forecasts yet for Quindell, but the firm’s first-quarter update told us of earnings per share (EPS) of 0.82p (before the 15-1 share consolidation). If that remains constant over the year, we’d see a total of 49.2p in earnings for each of the firm’s post-consolidation shares, and that suggests a forward price to earnings (P/E) ratio of just four!
There are cashflow issues, and I’ll look at them in a future report, but for now I just thought Quindell share were too cheap to miss. But how to buy some when we only have £145 in cash in the portfolio, and no obvious dead ducks that need to be sold?
Top-slice
Well, what I’ve done is top-sliced our Persimmon (LSE: PSN) holding and bought some Quindell (virtually, of course, as this is not a real-money portfolio). Why Persimmon? Well, I think Persimmon has a great long-term future, but the recent almost-criminal undervaluation has worked its way out. And with the 86% appreciation we’ve already enjoyed, we can sell some while remaining invested in the company with a decent sized holding.
The disposal of 30 Persimmon shares raised the sum of £347.30 after dealing costs, and added to our cash of £145.62 that gave us £502.92 to invest.
And that in turn allowed us to pick up 249 Quindell shares at 196.5p for a total of £501.73.
Broken the rules
This has broken our rule of restricting the portfolio to 10 shares, but rules can be bent sometimes, especially when you think there’s a screaming bargain to be had. I’ve also now picked two growth shares for the portfolio, when I’d really wanted to keep it to one — but I really don’t think this is the time to be selling Blinkx.
Anyway, that’s what I’ve done — I’ll bring us an update of how the overall portfolio looks next time.