View the article online at http://citywire.co.uk/money/article/a612548
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.
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.
News sponsored by:
Making the most out of Europe's potential means seeing things differently. Learn more about how BlackRock's focused approach to investing in Europe helps investors unlock the continent's vast potential.
In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
More about this:
Look up the shares
More from us
- Diary of a Dumb Investor: investing has bankrupted me
- Diary of a Dumb Investor: I’m making a killing on Standard Chartered
- Diary of a Dumb Investor: Anthony Bolton and I, kindred spirits
- Diary of a Dumb Investor: from oil to America’s decline
- Diary of a Dumb Investor: crash-bang oil shares for my portfolio
- Diary of a Dumb Investor: I'm going to make a fracking killing
- Diary of a Dumb Investor: Diamond’s raspberry in your face
- Diary of a Dumb Investor: everyone says buy BP. I say run
- Diary of a Dumb Investor: Lloyds in the eurozone scrapyard
- Smart Investor: a super addition to your portfolio?
What others are saying
Tools from Citywire Money
From the Forums
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add email@example.com to your safe senders list so we don't get junked.