Share Attack: 80 great tips to survive and thrive as a trader

Share Attack

80 great tips

to survive and thrive

as a trader

Malcolm Stacey

HARRIMAN HOUSE LTD

18 College Street

Petersfield

Hampshire

GU31 4AD

GREAT BRITAIN

Tel: +44 (0)1730 233870

Email: contact@harriman-house.com

Website: www.harriman-house.com

First published in Great Britain in 2015

Copyright © Malcolm Stacey

The right of Malcolm Stacey to be identified as the Author has been asserted in accordance with the Copyright, Designs and Patents Act 1988.

Paperback ISBN: 9780857194190

eBook ISBN: 9780857194961

British Library Cataloguing in Publication Data

A CIP catalogue record for this book can be obtained from the British Library.

All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publisher. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published, without the prior written consent of the Publisher.

No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the Publisher, by the Author, or by the Employer of the Author.

For Jo, Eleri, Robin

and Jack

Contents

Disclaimer

About the Author

Preface

Introduction

Journey to the Centre of the Earth’s Wealth

Getting Down to It

You’ll need some cash to get started

Choosing a broker

A suggestion for your first trades

Don’t let ’em get you in the spread

Is it gambling?

Greed and fear

Pop goes the psychology

How much to trade – safely

Be a chirpy contrarian

Picking growers

The number one investing rule

What to look for in a company

Free expert help

The magic PE

Good timing

My easy way to value a company

Three layers of the trading cake

Checking your choices

The importance of earnings

Beware the competition

Companies which corner the market

Spiders in company websites

Necessity versus luxury

Don’t grab the cutlery

Buying FTSE 100 shares

When to sell

Delicious dividends

Overenthusiastic research and development

Your stop-loss system

The wonder of the steady riser

Recovery shares

How to be disloyal

Following the Footsie leader

The trend of individual shares

Channel hopping

Stick-in-the-muds

The golden triangle

Have no regrets

An unbreakable high point

Let’s get sentimental

Read all you can

Good news bulls and bad news bears

Directors must have a stake

When fewer shares are traded

The pros and cons of penny shares

When swing’s the thing

Don’t touch these companies

Take advantage of reporting day

How often to trade

Shareholders versus pros and hacks

Don’t always trust the news

Can I turn professional?

Tasty targets

Riding the cycle path

Use your eyes

The boon of profit-taking

Hang-ups you need to overcome

Don’t be dejected about a falling Footsie

The right time of day

Bottom-fishing

Reading annual reports – the easy way

Data feed

Have I the right to hold you?

Hi ho, hi ho, it’s IPO we go

Perks and freebies

Cut them off

You can’t beat a beta

The most tip top, top cats?

Don’t understand it? Then don’t buy

Uncharted waters

Leave value investing to the experts

The sector section

Make it nicer with an ISA

A trade for all seasons

The great chase

Weddings made in heaven – and hell

Train your mind to behave itself

Don’t fear your broker

Don’t give share tips to your friends

Inconvenient company announcements

The falling pound

Ten reasons to sleep well as shares fall

Make your mates interested

It’s not just about profit

A final list of rules and hints never to forget

The oldest lessons of them all

Now all’s said and done

Disclaimer

This book is intended for those interested in trading in the stock market. You should be aware that shares can go up or down in value. You may not get back what you put in.

Not everyone succeeds with shares and no one can promise to make you successful. The author and the publisher accept no legal responsibilities for the contents of this work.

This is not a definitive exposition of share trading. You are strongly advised to seek professional advice before trading. Conditions in financial markets forever fluctuate and evolve, and what worked in the past is not guaranteed to work in the future.

About the Author

Malcolm Stacey was for 30 years among the BBC’s most experienced investigative reporters, specialising in business. He produced and reported for Roger Cook’s Checkpoint and You and Yours. After reinventing himself as a private share trader, he has written two previous books on making big money from shares. He has continued to follow his own tips and hints, gleaned from some of the top financial minds in the country – including well-known City luminaries he met in the course of making 8,000 television and radio programmes.

Malcolm is also an experienced tutor, having presented BBC Schools TV and worked with the Broadcasting Corporation’s training department.

Preface

Many books about shares pursue just one system, one strategy, one method. There may be variations to the grand plan, but it is still only a single methodology.

Relax. You won’t be burdened with following a single master blueprint in this book. I don’t think that’s the best way, because if you follow just one method, you won’t have the opportunity to pick ’n’ mix from hundreds of other brilliant wheezes.

While working in financial investigative departments of the BBC, I chatted to hundreds of politicians, tycoons and entrepreneurs with experience and influence in the financial world. From them I collected a cornucopia of imaginative ways to win with shares.

Since leaving the corporation to make a new career as an armchair share trader, I have test-driven many of these tips, seeking to find out which of them are the most successful. Many are included in this book for the first time. I also include a number of my earlier ideas, which have been brought bang up to date. Within these pages you’ll find a number of potent ways to milk the share market. Putting them together could make you rich.

Whether you’re a complete beginner or already an experienced trader, you’ll find hundreds of useful tricks and techniques. You’ll also hopefully be entertained along the way, as I share some humorous anecdotes from down the years.

This book is divided into two main parts. In the first, I will put you in the right frame of mind to trade shares successfully. I’ll then move on to reveal 60 of my favourite systems for making big money from shares. You’ll learn what to do and when to do it. And more importantly how to avoid costly mistakes.

Your thrilling journey to trading success begins here.

Introduction

Go on. You know you want to. So just admit it.

You’d love to make loads more money buying and selling shares. If you already own a few shares, you yearn to hold more. And if you already trade shares, you’d like to chuck in the day job and trade full-time.

You ache to hold a phone in each hand at parties and shout into one Sell Black Stuff Oil! and yell into the other Buy Ice Cream Holdings! Then turn to fellow guests and casually announce: I’ve just made five thousand pounds.

You crave a halt to the dreary commute to work. You’d rather slob around the house in old clothes. You want to break off from a bit of light trading now and then to swing in a hammock, smell the honeysuckle, study Proust, learn Walloon, or watch more telly.

You need to be rid of the boss on your back, the boredom of being nice to colleagues you don’t like, the clock-watching and the stressful avoidance of work. Above all, you hanker after real wealth. To be well and truly rolling in it.

Freedom to go your own way and plenty of legal tender to do it with. How does that sound? Marvellous? Enchanting? Ravishing?

But is it that easy? Yes!

I’ve been trading shares since my blind date with Boadicea. And I can tell you that being old isn’t much fun. For some bizarre reason God plucks hair from our heads and sticks it in our ears. Still, longevity has a great advantage in the golden game of share trading. It’s called experience.

When I first took an interest in shares it was the eighties, and you couldn’t trade except through a broker. And this stuffy bunch wouldn’t even look at you unless you were already rich. Furthermore, they usually chose the bunnies you invested in. And you couldn’t really dig in and out of the markets anyway, because long phone calls and longer expenses were involved.

Then in October 1986 Big Bang came to the City. From that point anyone could dabble in shares in his or her own right. That’s when I began buying shares. I have not let my old peepers stray off the markets since.

So unlike most writers on shares, I have hangar-loads of hard-knock, bashed-on-the-head, climbing the walls experience. I’ll share it all with you in this book.

Journey to the Centre of the Earth’s Wealth

Why you should shift shares

You don’t believe trading shares can make you rich? That only happens in trashy novels? No.

Do you know how many share trades are made in the world? The answer is a mind-wrenching two million every second! Thomson Reuters, the financial information people, tells us that ten years ago it was only 20,000 trades a second. So share trading is becoming more popular all the time. If it were not profitable, would this massive gold rush continue?

People who’ve invested a few thousand in one company have become millionaires. Sometimes a lot wealthier than that. The world’s richest man, the USA’s Warren Buffett, did it all with shares. They say he’s sitting on 66 billion dollars. It’s thought he makes 37 million greenbacks a day. Yes, every day.

My personal best was Overnet Data Ltd., a small British company which became a 200-bagger. That means the share grew in value by 200 times. Golly! And the story behind its change of fortune is the sort of event in Shareland which can transform your life just as much as any big pools win.

Overnet Data was not doing particularly well as an internet company. But a totally different kind of enterprise coveted a listing on the London Stock Exchange. So it bought out Overnet Data as a cheap and easy way to join the club. The invader was FuturaGene. Their business was modifying seeds to produce more food in deserts or salty land.

The City warmed to this useful venture and the shares rocketed. Sadly, I did not invest in this dream firm when the share was at its cheapest and – being a nervous soul – I sold out before it reached its high point. I only invested £300… but I realised a gain of £23,000. If I’d put £10,000 in at the lowest point, I would have pocketed two million pounds!

Very few shares yield such a fabled return. But some companies do, like Microsoft, Apple, Google, Facebook and Twitter. They all began as tiny operations.

Taking an example from September 2013, shares in Sable Mining, which operates on the borders of Guinea and Liberia, rose nearly 300% in a very short space of time. See the chart below. So big windfalls can and do happen.

The shares of Sable Mining have since fallen back, but my point was to illustrate to you what’s possible with share trading. It’s really the best place to put your money if you want big returns over the long term.

Ok, you’re not a fool. You know this book cannot guarantee instant wealth. Disaster might strike. We may be bowled out by a truculent asteroid the size of Mars. A global economic disaster could plunge all shares into a dark hole. There might be a third world war. Or you could just choose the wrong shares at the worst possible time.

But the truth is that eye-watering disaster is uncommon and often equities recover anyway. So if you have cash sitting around, you ought to be putting it to work in the stock market, or shifting shares as I like to put it.

Challenge expert advice

You’ve decided to trade in shares. Good move. Your next step will be to look for guidance on how to be successful. One thing’s for sure, you won’t be short of experts willing to share their views. But you need to watch out, as a lot of what they say tends towards the asinine.

For instance, some commentators give you stunning hints, such as: Always know when to sell your shares. Really? And when is that, then? It’s the most difficult decision in share trading and it deserves proper answers.

I’ve even seen: Only buy shares which have a good chance of returning capital growth. By capital growth they mean the share price will go up. Fine – only buy shares which will rise. Suits me. But how do you do that exactly? Keep reading.

Another gobbet of naff advice they give on financial websites is Match your trading style to your lifestyle. Well, apart from my loathing of that depressing expression lifestyle, what’s that all about? My mode of living requires buckets of money. While my trading style will be the best available to make the most dosh from my shares.

My trading style will also adapt as companies and the financial markets change. My trading style will therefore have nothing to do with whether I enjoy making jam, playing poker, weaving floral tapestries or going to bed early. So there!

I don’t let articles, speeches, blogs or anything else said or written about shares sway me, unless the arguments are top-notch. Economists are notorious for reaching widely different conclusions on the same set of facts. When ASOS, the online fashion outlet, had a warehouse fire, a writer I really respect said sell the shares. He believed customers would