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Diary of a Dumb Investor: I was nearly duped into a fashion trap

I may have profited from the Standard Chartered saga, but that doesn't mean I'm going to buy any old thing with a battered share price.

 
Diary of a Dumb Investor: I was nearly duped into a fashion trap

Remember the news reports about the Russian neo-Nazi tee-shirts accidentally sold in Burton, the men’s clothing shop?

‘We will cleanse Russia of all non-Russians!’ it said in Cyrillic, a detail only noticed by a member of staff after they’d been on sale for a while.

That blunder didn’t stop us Brits adorning ourselves with often unintelligible writing. It always amuses me how people love to brand themselves with Japanese or Chinese script, be it with a tattoo or an item of clothing. It’s exotic.

One company is capitalising on this: Supergroup (SGP.L), owner of pseudo-Japanese fashion brand Superdry.

A 'challenging' year

Investors in the company had their experiences summed up neatly by chief executive Julian Dunkerton in May, who reported a ‘disappointing end to a challenging year’. This was a year that included three profit warnings and even ‘arithmetic errors’.

The shares have been heavily sold off for a year and a half, with some of the mass of fund managers who bought into the shares beating a hasty retreat.

Citywire’s own Smart Investor (writing in January) praised the group’s ‘highly impressive profit growth, double-digit return on equity, low debt and what may well be a quality product’, but then pooh-poohed the shares as he is worried about sustainability in the fickle fashion industry. The hyper-rational investor makes his decision based on his view of the fashion industry? Ha! How I scoffed on reading that.

Time for a turnaround?

Well, maybe not. I was all prepared to write about how the shares are good value, with management changes – Theo Karpathios, a co-founder and chief of wholesale and international, resigned last week – heralding a turnaround in the company’s fortunes. That’s what the analysts seem to say.

But I’ve realised that Smart Investor is right – Superdry’s heavily branded clothing is particularly vulnerable. As one fashionista told the Guardian back in April: ‘The last brand that captured the mainstream British public in that sloganeering way was FCUK. Superdry have taken over from them, but the market tires easily and moves on.’

That resonates. FCUK was so cool when I was about 16 (it looks like a swear word!), but no longer.

Going with my gut

This illustrates a couple of problems I’m facing. In my efforts to behave like a proper investor – I had even been comparing price to earnings (P/E) ratios for Supergroup – I had forgotten to think like a real person and use common sense. My gut tells me this brand isn’t a stayer. Plus I've consistently stated that I'm wary of investing in UK consumer spending.

And besides, I just don’t have enough cash to swoop on a good investment when I spot one. That was a blessing last week when I almost made a hasty investment in Supergroup shares when the news broke of Karpathios’s resignation. After all, analysts quoted in the press were saying that now could be the time to buy, even as the shares fell in response.

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9 comments so far. Why not have your say?

David 111

Aug 20, 2012 at 17:06

Agree that RIT is much overrated. Why is it still a 'Citywire Selection'?

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Ian Burgess

Aug 20, 2012 at 17:07

Sold your Standard Bank shares yet?

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William Phillips

Aug 20, 2012 at 17:40

The ambition to cleanse Russia of non-Russians can hardly be called neo-Nazi. The Nazis intended to cleanse Russia (at least, the European part) of most Russians and replace them with Germans.

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Lee Whitehead

Aug 20, 2012 at 18:12

so where have the screengrabs of your portfolio gone? did you sell standard chartered? what is your current state of loss on BP? are you re-investing dividends from that? specifically, because you should have had by my reckoning at least 3 divi payments and you are ex-divi already on the last quarter...

Ponderings are fine, where are the facts and where is this article going?

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Suze Jamieson

Aug 20, 2012 at 21:21

Nowhere much, methinks. Direction lost.

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Moylando

Aug 20, 2012 at 22:21

You say " analysts in the press are quoted as saying now could be the time to buy"

Could be - might not be. Who knows. Can I be an analyst ? I know a lot of things that "could be"

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craig knox

Aug 21, 2012 at 23:23

You were simply lucky with SC. I considered buying them myself, but the ubcertainty of the fine was too great a deterrent. Look @ Burberrfy. Forget Supergroup . . .

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Michael Peters Fenwicks

Aug 26, 2012 at 08:57

DI,

General rule: if enough people predict something, it won’t happen.

Personally current market calls for directional trading to say the least i.e - SC..

Simple as that!

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Ian Giddings

Aug 26, 2012 at 21:59

Don't agree RCP is overrated. When the market wobbles, as it will, RCP may be your steadiest investment.

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