The worst times to buy are usually at the beginning or end of the day. Sometimes spreads can be as wide as 30p or 40p — and an unwary buyer can end up paying a silly price.
I was keen to buy 1,000 shares in Cattles, a finance company, for my self-invested personal pension (Sipp) on August 24. I decided to buy at 9am when the share had a nice small spread of 1p — the shares were 310p to sell and 311p to buy.
I entered a buy order for shares at 311p and was about to send it to E-Trade, my Sipp broker, when the spread suddenly widened to 310p-314p.
I certainly did not want to pay an extra 3p, so I put the order on hold, which proved a wise decision. The spread remained wider until 10am, when it gradually began to narrow. It went to 311p-313p and then 311p-312p. I eventually bought at 11am when the spread was 311p-311¾p. E-Trade managed to shave a bit off the buy price and I bought my 1,000 shares at 311.64p.
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But why did I want to buy Cattles? The company lends money to consumers under various trading names including Dial4aloan and Welcome Car Finance. Results announced on Thursday revealed strong growth. Profits for the six months to the end of June are up 15% and the dividend has been increased by 15.2% — I’ll receive a payment later this year. My target price is 360p, which I think it can hit by the end of the year.
I sold one share this fortnight, XP Power, taking a small loss of £216. Director sales in the firm prompted me to sell my 800 shares on August 17.
It has been an excellent fortnight for my fund with a number of companies performing well.
Fenner, an engineering company, reversed a decline to 100p and has raced back up to 111p. I bought at 86¾p in November last year, and have now made a profit of £1,116.
Vanco, an IT company, has climbed to 235p after touching 215p. I bought at 181p nearly a year ago, making a profit for my fund of £1,296. The firm recently signed contracts across Europe worth £10.6m.
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My idea of trying to profit from a short-term trade in Serco, a support-services company, has paid off so far. I bought the shares at 190.9p because they trade in a 190p-220p range. They always bounce when they hit 190p and start to decline once they hit 220p. The price has risen to 201½p, and I’m aiming to take profits at somewhere near 220p if my plan works out.
My fund has risen £995 this fortnight, yielding a total profit of £31,058 since I started trading in September 2002. Profits so far in 2004 are £4,024.
I’ll be back in a fortnight with another update.