Can I do it?

Can I do it (Pick Winning Shares)? 

This is one of the most common questions that Mr (or Mrs) Negative keeps whispering inside your head, particularly if you have only been investing for a short while.

The problem is that there is so much information available and this is often contradictory and confusing. Then there is the argument about the style of investing that is "best". Value, Growth, Income, Recovery, Momentum Stocks etc. etc. Next you get those who say that only fundamentals work and those again that swear by technical analysis (as it's all in the price).

Well, I'm greedy, I want to use the best of both Worlds (Fundamental & Technical Analysis) and what's more, I want the freedom to choose (at a particular time and in a particular market), whether to invest in value, growth, income, recovery or momentum stocks. That's why I'm a DIY-Investor!

I'll wax lyrical about the advantages of combining fundamental & technical analysis in the DIY-Investors One Day Investing Course on Saturday (29th September) and share many winning ideas with you - if you'd like to come, grab the "Last Place Remaining on Picking Winning Shares".

DIY-Investors Portfolios (Transactions)

Portfolio Changes

I've recently made some changes to the actively managed portfolios and so I thought I'd post a mid-month update.

UK Coal

The first change was the sale of UK Coal (UKC) from both the 5 stock and 10 stock actively managed portfolios. I've shown the chart below...

The red arrows, marked on the graph, serve to illustrate the following points:

• The 50 day moving average is in a decline, with the price seemingly unable to break above it (apart from a day or two at the beginning of May).
• The OBV has been moving steadily downwards since the Spring.
• The AD indicators are still registering a downtrend and this is increasing (solid line rising).

Results

The recent UKC H1 results (released Friday 10th August 2012), showed a return to form for the Company (a loss!). Notwithstanding the apparent tangible book value, the news on re-structuring gives little hope for an early resolution or indeed that there will be much left for shareholders. Either way, the likely delay and regulatory approval made me decide that there are better places to invest our funds (albeit virtual funds in this case). The lesson here is clear - don't ignore the Technical Analysis! I sold both holdings at 6.3p

Purchases

I have recently started to become increasingly bullish in my views about the automotive retailers/distributors, as you probably gathered from my recent broadcasts and Blog posts. I have therefore re-invested the proceeds into Pendragon (LSE:PDG) and Vertu Motors (AIM: VTU) - the mystery company that I posed the question about during the TV Broadcast on 7th August. Full details of the purchases will follow in the next internet TV Broadcast on 5th September at 8pm.

Olympic Spin Off for Halfords?

Halfords (LSE: HFD), closed at £2.30 on Friday

Although this in itself is not significant, being a modest 2.4% increase for the day, there is some  interest for us DIY-Investors, starting with the SP graph...

I've numbered the relevant points in orange on the graph, as follows:

1. Double bottom formation
2. Brakout above the 50 day moving average (blue line)
3. OBV breaks out above the downtrend line (marked orange on the OBV indicator)
4. Buy signal on the slow ADX (blue line crosses up through red line), one day after...
5. Buy signal on fast ADX (25th July)

So, is there anything of interest, within the fundamentals, on the Key Metrics?

Yep!

Again, I've marked some of the salient points, as follows:

1. Yield (h) 9.57% - which is higher than the P/E ratio of 6.74 (by about 42%!)
2. Low PSR(pr) being 0.54  (£457.6m/£849.1m)
3. Cashflow per share consistently higher than eps
4. Slightly lower profit margin last FY of 10.41% but still reasonable for a retailer
5. Net Gearing still not excessive (although increased slightly)

Other factors  that should work in Halfords favour

Team GB at the front of the peleton in Mickleham (Olympic Mens Road Race, 28th July)

With the recent success of the Olympic Cycling, there is even more interest in all forms of cycling (road, racing, bmx etc) - which I believe should be good for Halfords.

Similarly, the economic conditions favour DIY car maintenance - which should feed through to higher sales for Halfords.

Recent RNS Announcement (19th July)

There were mixed messages in the RNS on 19th July (see below)...

The resignation of the CEO may leave HFD in limbo until a replacement is found but it could also be the start of the action that turns Halfords around.

Improving weather, successful Olympics and school summer holidays will hopefully bring a change of direction for the bike sales in halfords. We'll just have to wait and see.

Summary

As ever, we have to make up our own minds on this but I like the strong balance sheet, DY above PE and the shareprice graph.

What do you think? Please let me know.

What! - Pendragon Again?

OK, OK - But take a look at this (Pendragon up 8.93% today)!

Pendragon (LSE: PDG) closed today at 15.25p (up 1.25p or 8.93%). So what's got me off my backside to miss tonight's Olympics? Well,have a look for yourselves...

It's this bullish reversal pattern (yellow arrow on graph), with its base on the sloping support line (magenta colour) and the high volume today. In my opinion, this could herald the start of another upward move - following the interim results released on Tuesday 7th August.

It's worth reminding ourselves of the long-term shareprice graph (see below)...

From this, you can see the resistance line, connecting the lower highs, and the lateral breakout that I referred to in my Live TV Broadcast on 7th August. There looks to be a support line developing which, if it remains intact, bodes well for the future of PDG in the DIY-Investors portfolio.

As usual, DYOR and I recommend that this includes you reading the Interim Results and the Analysts Presentation (7th August 2012).

Mick.

DIY-Investors - You're Keeping Me On My Toes!

My thanks to Simon & Mike for getting back to me so quickly, following the DIY-Investors Live TV Broadcast last night. The reason...

I dropped a "Clanger" (albeit a small one) - hopefully proving that I am fallible (and human - or so my Martian friends say). The item in question was the "Pendragon Breakout", wherein I stated that the results were due out on 23rd August 2012 (based on last year's timing - and as carried on Sharescope). This highlights an interesting fact, that Companies lower down the FTSE (and I believe on AIM as well) are not obliged to tell us in advance the date that they intend to release their results. The net effect - I got caught out! Oh well, that'll teach me to not check for announcements, on the day when I'm busy preparing for the TV Show.

So, do the Pendragon Interim Results change my view on anything?

Mike W. pointed me in the direction of a comment, contained within the interims, regarding the cashflow statement. The preamble (page 14 of the interims) stated:

My reading of this...

A slight 'slap on the wrist' by the Financial Reporting Review Panel, which doesn't change the net cash flows (or opening and closing cash positions). In summary, it doesn't change my observations that PDG seems to be turning around (recovering).

My apologies to viewers on behalf of my oversight but I hope you'll agree (particularly if you read the interims) that Pendragon deserves consideration as a recovery stock.

Mick (10.30am, Wednesday 8th August 2012)

Olympic Fever or a Quiet Weekend?

Coming up to this weekend, I've had a difficult decision to make... Olympic Fever or a Quiet Weekend?

We are entrapped (well at least the car is) for the weekend, as Olympic Fever grips Dorking. We're playing host for part of the London 2012 Road Races (men tomorrow and Women on Sunday). The road races include the notorious "zig-zag" road, that snakes up Box Hill, with the men doing 9 circuits of the Box Hill Loop and the women doing two circuits. Both races start and finish on the Mall and are accompanied, for their duration, by overhead (helicopters) and vehicle based security and television crews.

Entering into the spirit of the occasion, we've decided to invite down Jordan (Grand-Son) and to go out to a spot where we can see the Olympic cyclists go past 9 times (twice for the women). The whole area is swarming with visitors, arriving for the event, and there are two noticeable landmarks that have appeared.

The (temporary) Olympic Rings on Box Hill

The Olympic rings are visible for miles around and provide a clear signpost to Box Hill. They look spectacular, when viewed across the rooftops from Dorking (see below)...

Olympic Rings on Box Hill - viewed from Dorking

Fortunately, the other landmark will be permanent - being a sculpture set in the middle of the Pixham Lane roundabout on the A24. This was part funded by our local Mole Valley District Council, with the balance provided by local sponsors.

 "2012 Cycle Race Sculpture" by Heather Burrell 

Well, I hope that you'll understand that I'm going "with the flow" this weekend, so I'll be out there cheering on our lads and lasses, as they go for gold. Come on Cav, Bash on Brad, get nippy Nicole and don't linger Lizzie!

Come on Team GB!

Is Thomas Cook Turning?

Thomas Cook Group (LSE: TCG), closed last night at 16.0p - giving a MCAP of £140m for a Company turning over in excess of £9Billion a year. What caught my attention was the clear breakout from the downtrend (see below)...

In terms of fundamentals, the Sharescope Key Metrics (below), show clearly what has been happening...

From this, you can see that the PSR(h) is only 0.014 (MCAP 140.0m / T.O. £9808m) and the PSR(pr) is 0.015 (MCAP £140.0m / T.O.(pr) £9662m), reflecting it's recent past history.

Surviving the challenges of the recession is the game for Thomas Cook and making money from successful turnarounds is one the great ways for DIY-Investors to beat the markets. So what are the factors that we should take into account in making our decision about whether to invest or not?

Well, from my research this morning, here is the position as I see it:


Technical Analysis

Having suffered a drop from 272p (Spring 2010) to the recent low of 10.2p (22nd November 2011), with a fall of 96.3% in the past 28 months or so (see below), the shares in TCG can truly be said to be "out of favour" with the smart city money.

However, there is a clear breakout from the downtrend, coupled with the following signals which you could argue are the first indications of a change of sentiment (and possible opportunity for us DIY-Investors). The short term graph (below) is very interesting!

From the initial breakout (above the 50 day m.av.), the price drifted back, went sideways but then met resistance from the downtrend line until Tuesday 17th July, when it broke through. It did this very "quietly" with no great volume to announce this to the World. Yesterday, it followed with another tick up, with slightly increased volume (but still nothing to shout about).

However, what sealed it for me was the very slight twitch (up) on the OBV, coupled with the buy signal on the ADX indicators (lower two secondary indicators above). The RSI also started to turn up.

The Debt Problem

TCG have made it clear that lowering debt has been made a priority and the Shareholders Approval (29th May 2012) to "Life Saving Asset Sales", coupled with the appointment of Harriet Green (previously boss at Premier Farnell) as the new CEO to mastermind the recovery (or should it be resuscitation?).

The proposed sale of its Spanish Hotel Chain and a 77% stake in Thomas Cook India, together with proposed sale & leaseback of some aircraft might just be enough to allow the patient to breath.


Summary

There is clearly a lot of risk in investing in TCG but having just re-read Peter Lynch's book "One Up on Wall Street"  during my recent (wet) holiday in Cornwall, I can see potential reward too!

As ever, please "Do Your Own Research" and make up your own mind on this!

Mick.