Robbie Burns’ Monthly Trading Diary
ROBBIE BURNS’
monthly trading diary In my experience, spread betting really comes into its own when you spot a situation that’s gone too far, one way or another, because of a news event. If you get it right you can make a reasonably quick profit in a few days at minimal cost. Trying to decide whether it has gone too far, or not far enough, is to play detective. Any detective you fancy. Who would you like to be, Sherlock, Vera or Wexford?
When you spot one of these situations you also need a plan. What you’re looking for is a share that has/is moving fast because of either something in the news, or as a result of a statement. The market is reacting to it, and you can make a turn with really nothing more than a bit of common sense using detective work. I have found that the major clues usually come from a sentence that stands out in company announcements. One of my favourites ever in this area was Greencore, the Irish food business which supplies ready meals. It suddenly got hit by the horsemeat scandal back in January last year. The shares were in freefall. But I spotted a few crucial lines in an announcement the company made. “Beef bolognese sauce represented c. £0.3 million of Greencore’s £1.16 billion turnover in its last financial year. The annualised revenue of all products withdrawn represents less than £1 million.” The company also seemed to be saying it was unlikely it supplied much else horse-flavoured stuff. It was just a horsey sauce.
42 | www.financial-spread-betting.com | June 2014
So, in essence, withdrawal of the pony polluted products meant little to the company’s overall performance. Nevertheless, the shares saw a 30% fall within a few days – way too much for a company whose withdrawn products didn’t even account for 0.1% of its turnover. So I bought tons and tons of Greencore in the 80s, both on spread bets and in my ISA too. I figured that, at the very worst, a quid would be a fair price, but there was actually no reason why the price shouldn’t at some point head back up to its old high. Well, the price gradually lifted up, and guess what...? It went all the way to 300p. I took some profits a bit earlier than this, after it bounced up from the 80s, but was along for a very enjoyable ride. On the initial bets in the early 80s, I placed stops at a hyper-cautious 75p. If the worst came to the worst, I knew I would then only lose small amounts if the price kept falling. And I could start again later. The amount of work I did to make giant profits here? Well, very little really. In fact it was all just a bit of common sense. No complex technical analysis was needed.