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Diary of a Dumb Investor: risking it all on Burberry

Or at least my last thousand pounds or so of uninvested cash.

Diary of a Dumb Investor: risking it all on Burberry

It is said that investors should understand the extent of their own appetite for putting their money at risk. Mine, a couple of recent incidents have reminded me, is high.

First we’ll start with P-Kitty. The cat. Picked him up at the weekend with Mrs DI. A four-year-old stray with an undiagnosed eye condition, who was an unknown to his RSPCA keepers: we took him regardless. Snubbing the younger, vet-certified feline rejects at the cattery, we adopted the roguish moggy with the dodgy background and undiagnosed medical condition. Financially, we could pay dearly for this.

Then there was Standard Chartered (STAN.L). My punt on a free-falling scandal-struck banking stock was described as ‘gambling’ by my many critics. But it seems to have paid off. Being at the whim of international regulators and courts, the result could have been different. It was a risk.

My portfolio: Click to enlarge

And now there is Burberry (BRBY.L). This is a company with a chequered recent past. Only two months ago it made a profits warning. Soon after, directors in the company snapped up some shares (which I’m reading as an encouraging sign). Well-respected fund managers seem to be keeping the faith too, pointing to the company’s strong balance sheet and capable management team in interviews with Citywire.

Burberry seems to me basically a punt on Chinese demand for luxury goods. A hiccup in Chinese demand was partly behind the profits warning in September. I don’t think that’ll last. And the company is a survivor, be it supported by the hooligan pound of the past or today’s wealthy Asian shoppers.

Some analysts, noting the undervalued shares, are now predicting potential share price rises of up to 60%! Long-term that is. They're quoted in the news as saying Burberry's brand and infrastructure is better placed fight off a slowdown than it was in 2008.

It’s a bit of a gamble I know, but Burberry seems to be simply another case of a decent brand being operated by a company whose shares have been over-punished.

There’ll be an update from Burberry later this week. In the meantime, I’m agonising over whether to put my last grand in now.

11 comments so far. Why not have your say?


Oct 08, 2012 at 18:13

Find a share chart for Burberry. Look up the charts for the past year, 6 months and 3 months. Then decide whether you think it's a good investment.

The time to invest in over-punished companies is when their shares have started to rise again, not when the shares are still going down. Do the maths . . . .

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wayne roberts

Oct 08, 2012 at 18:27

Every time Burbery gets near £11 its going to be shorted, you sure you can take more punishment? Why not buy something that is going up?

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Lee Whitehead via mobile

Oct 09, 2012 at 08:44

A junior oiler such as Range Resources would have given you exposure to Junior oils, huge growth potential and large capital gain possibilities. At your age I would be more aggressive with risk!

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Oct 09, 2012 at 09:08

If you like a retailer - go for Esprit. Probably the cheapest decent apparel retailer in the world. Expanding in China also.

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Oct 09, 2012 at 09:25

Dumb Investor must be an imposter:

"First we’ll start with P-Kitty. The cat. Picked him up at the weekend with Mrs DI. A four-year-old stray with an undiagnosed eye condition, who was an unknown to his RSPCA keepers:"

If the cat was unknown to his RSPCA keepers, how did they know he was four years old?

You can have an "unidentified" eye condition but you cannot have an "undiagnosed" eye condition. The fact that someone has noticed that the cat's eye does not look normal means that an eye condition has been diagnosed.

Finally, I do not believe that the RSPCA would re-home a cat before it had been given a full health check, and received treatment for any conditions that existed. Also they would have advised the new owner of any ongoing health problems and the right course of action to take to prevent the cat from going blind if it was at-all possible.

As regards the portfolio: It is not looking too bad but there again it's such a mixed bag that the winners are negated by losers. I cannot see how you can make money following such a broad spectrum unless DI is banking on a global recovery.

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Oct 09, 2012 at 11:06

How have you managed to miss out on Biotech Growth Trust?

Don't be traumatised by your failures - Jupiter European Opportunities is 20% up over the last 6 months - you should have gone back in. (I did!)

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Brian @ RisingSum

Oct 09, 2012 at 14:51

We're pretty bullish long term on Burberry. Through the entire recession Burberry has continued to grow, and from an intrinsic value perspective it's still very much undervalued.

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wayne roberts

Oct 09, 2012 at 15:09

I can't remember the last time I saw anyone wearing any Burberry.. maybe that has something to do with it not making money? Just an idea..

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Brian @ RisingSum

Oct 09, 2012 at 15:23

That is a worry. I had a friend stop by their flagship shop in London and he said it was empty, while the other luxury brand shops were still busy. But as this is the first warning in donkeys years I suspect a lot of investors have just cashed in. The management team is still in place - so I'd be inclined to bet on them - not a lot but some. When a similar thing happened with Tesco in January, it dropped 19% on a profit warning, Buffett bought more.

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wayne roberts

Oct 09, 2012 at 15:43

Yes but he holds stuff for decades, I can't see Tesco going out of business but Burberry.. the other luxury brand shops that were busy would surely be a better place to put money into, I also can only see people glad to get rid of their shares anytime Burberry starts to rise so its going to need some pretty good solid fundamentals to get past all of that.. but who knows? Maybe this is the pullback that everyone will be too scared to buy into?

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Lee Whitehead

Oct 11, 2012 at 13:42

nice move on burburry judging by todays SP increase!

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