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Diary of a Dumb Investor: time to snap up bashed BG Group?

This feels a bit like Standard Chartered: over-sold and ripe to buy.

 
Diary of a Dumb Investor: time to snap up bashed BG Group?

‘Fill your boots!’ said one private investor, Fatcat, on today’s Citywire article showing that shares in BG Group (BG.L) have dropped 19% today. ‘A steal at these levels!’ he adds.

Another, Anil Kumar, also suggested the share could be a 'buy' at these sold-off levels.

After all, although the 19% share price drop comes after the gas producer warned of poor production in the coming year and following a sale of profitable assets to pay down debt, it is still a 19% share price drop.

Too much.

In fact, since that article was written this morning, the shares have already crawled back a bit.

As far as I’m concerned there are two competing facts:

  1. We don’t know how the company will keep making as much money;
  2. The market seems to over-react in these situations, over-selling a decent company.

It is said to have good prospects in Brazil and Australia, and such sharp share price falls could also attract takeover bids.

We’re in the casino here, and I’m not sure I’m feeling brave enough to throw my chips down today.

43 comments so far. Why not have your say?

Maverick

Oct 31, 2012 at 15:22

"Over-selling a decent company"? BG was 5.7% down over the last year even before today. There are dozens of other companies that were far more decent.

Companies drop 15% in a day because the market has lost faith in them. It doesn't matter if they're now undervalued if the market doesn't follow your unimpeachable logic.

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J Bewey

Oct 31, 2012 at 15:22

Felt brave and topped up. Did the same with BP when it tanked and Burberry. Call me cynical but do the market makers try to make the situation worse than it is to their own ends?

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J Bewey

Oct 31, 2012 at 15:23

is it to should read for

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snoekie

Oct 31, 2012 at 15:47

DI, I may be wrong, but whilst you are sitting on your thumbs others have jumped in, I did.

It was a share I have been watching for some months, in part waiting for it to drop to a reasonable level, but I never anticipated something quite so big. The other part is that a few months ago I didn't have spare cash.

This is a share for a long term holding which is likely to come into its own as there is a dash for gas as there us no so much being found. With its liquefaction expertise, BG should be able to benefit.

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snoekie

Oct 31, 2012 at 16:41

Oops, should have said, penultimate line, "is now so much".

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winki

Oct 31, 2012 at 17:02

Way oversold on future growth.

All other areas are OKish.

Worth a punt

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fatcat

Oct 31, 2012 at 17:10

Jumped in at sub 11. An absolute bargain by market close.. Oh happy days!

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walkup

Oct 31, 2012 at 17:29

Ah, such are share dealing decisions made of.... yes, no, yes, no. Fortune favours the brave, or the wise. Tomorrow you can repent at leisure, or not.

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wayne roberts

Oct 31, 2012 at 17:33

BG isn't such a great company, never hear anyone saying anything good about them and constantly upping their prices will soon leave them with hardly any customers.. seems easy to get mugs on board a stock - just drop it by 20% or so and they all come running, btw how's Burberry doing? Can't get back to previous highs can it and nor will BG.. Good luck!

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Smithy

Oct 31, 2012 at 17:47

Wayne, I think you mean British Gas (now Centrica). BG is the upstream part - they don't sell to retail customers.

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snoekie

Oct 31, 2012 at 17:57

Spot on Smithy, and they liquefy the product so it can be taken to where it is required and no doubt help unfreeze it. They also drill for the stuff, and have been quite successful to date.

Maybe Wayne is put off by the low divi on top of his lack of knowledge about the company. Not doing his reading.

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wayne roberts

Oct 31, 2012 at 18:10

I admit to not having any knowledge of the company, I just go on price action really, just see lots of things bounce from an initial drop and then drop heavily but yeah sentiment might be positive for this company and getting on this pullback would be the right thing to do.. if BG had gone up to new highs by 20% I would definitely buy on a pullback, I would be looking to short BG anytime it gets near where it tanked from.. and might lose money but I do think it has got a battle on its hands to get to new highs..

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Suze Jamieson

Oct 31, 2012 at 18:27

Agree with Snoekie, though I jumped in within the the hour with a quick profit in mind (4% so far), so might keep rather than ditch early next week when things normalise. Anyway DI's already too late to minimise the risk.

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fatcat

Oct 31, 2012 at 19:22

Thank god we have the likes of Wayne who have little knowledge of what they invest. One guy loses my wins as a cfd trader and long may they stay there. He would never be at final table.

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anil kumar

Oct 31, 2012 at 19:46

Brazil is massive for BG(by the way its NOT British Gas)and they need to fucus there.LNG experience will work hugely in their favour.LNG has a very bright future.Admit low dividend is not working in their favour.If it falls too low,it will be taken over.

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Moylando

Oct 31, 2012 at 21:14

From an investor to the get rich ( poor) quick brigade on here -

Have you tried an afternoon in Ladbrokes ? Nice seats.

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Mahendra Patel

Oct 31, 2012 at 21:18

BG share price is highly rated because of growth prospects. If growth resumes after flat next year, then the present fall is excessive.

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Suze Jamieson

Oct 31, 2012 at 21:40

@moylando - aah, sour grapes.... I can taste the acid...

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wayne roberts

Oct 31, 2012 at 22:09

LOL if BG was a horse it would have been limping and now its got a broken leg and just to add to the misery DI is buying it.. yes it'll plod along for a while before it collapses in a heap and is taken out back to be shot..

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Moylando

Oct 31, 2012 at 22:19

Suze -

So, buying shares when they fall by 20% is a good strategy for DI and then hoping they bounce ? Seems to me like an afternoon in a Ladbrokes shop.

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Anonymous 1 needed this 'off the record'

Oct 31, 2012 at 23:49

EH WHY DID THE CE SELL £7M OF HIS SHARES A FEW WEEKS AGO?

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snoekie

Nov 01, 2012 at 01:35

Anon1, insider knowledge!

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Magic Monty

Nov 01, 2012 at 01:45

Hi Folks,

Go back to the findamentals. BG is capitalised as more than its revenue, has a paultry dividend yield and is probably sitting at these silly high prices and P/E's becauise its well known like M&S.

Clever investors will avoid until its around 500p which looks to me to be fair value based upon it's revenue streams and prospects. There are hundreds of better value shares in the FTSE than this.

Big jump or sharp falls are irrelevent - Go back to the fundamentals and ratio's that you use to decide if the share is cheap or expensive then decide if it's worth paying. BG is a joke at these high prices even after the fall.

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Spotdog

Nov 01, 2012 at 08:30

I also bought BG yesterday and also Burberry when they dropped. Was lucky, couldnt get hold of my broker when they had fallen 13%, finally got hold of him when they were minus 17%, so think I got a good price, just under 11 pounds.

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Moylando

Nov 01, 2012 at 11:04

What is an avid day trader like you doing messing around with trying to get hold of a broker ?

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Maverick

Nov 01, 2012 at 11:11

Spotdog - So the share price is down to £10.68 this morning.

Don't buy a share when its price is still falling . . . . . .

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Alastair

Nov 01, 2012 at 11:20

Buying the dip is only cheap if you actually want them.

You only know if you want them if your research is already in place.

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Spotdog

Nov 01, 2012 at 11:44

I am a new beginner so always buy through our bank. I know it is probably very expensive but they also give me advice (mostly bad) along the way, and to be perfectly honest I dont have the confidence to do it all myself.

Have been wanting BG for a while now which is why I snapped them up.

And yes I agree never buy when the price is falling, but actually when I bought yesterday the price had been down to minus 20% and was on the way up.

I did the same with Standard Bank - bought the day they fell 25% and sold the next day - got the dividend and made some money as well, so sometimes it works.

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Suze Jamieson

Nov 01, 2012 at 11:52

@Moylando - God no, I wouldn't recommend it for him! No, I just bought when they were 19% down, then sold at the end of the day for a quick 3.6% profit. No interest in hanging on to them for all the reasons cited above.

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wayne roberts

Nov 01, 2012 at 13:44

hey BG is a steal at these levels! LOL

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fatcat

Nov 01, 2012 at 14:44

here comes wise Wayne again!

Jumped in again at 10.80 and out at 11.05. Keep sticking your chin out Wayne- this is fun!

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Anthony Palmer

Nov 03, 2012 at 10:38

It has always been a lousy investment with a lousy dividend

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Nimblenod

Nov 03, 2012 at 12:04

As an original "Sid" I was nursing a huge premium so bought enough shares at the current price to absorb some of it..

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Ubiqueloco

Nov 04, 2012 at 09:30

I think there is more drops to come yet.

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Ubiqueloco

Nov 04, 2012 at 09:31

Should be there are! Sunday mornings urgh!

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Sud via mobile

Nov 05, 2012 at 12:13

Everyone is missing the point here, DI is investing with a small amount of money via Hargreaves Lansdowne. If he was a cfd account which Hargreaves offer via IG markets the yes speculation on loss and profits in short time frames would apply.

Only one person spoke about fundamentals the rest sound like beginners who sit on the sideline and talk about the latest big news, guess they will be taking about HSBC since that is in the news, so boring!

My take on BG plc three main points when solely looking at price:

1) one year momentum is -9.5% this is not good for the long term

2) Volume change % 10d vs 3m -6.57% not good less are buying.

3) the share price has crossed the 200week moving average this is not good signalling a long term decline in the price.

Now fundamentals which are for longer term investors

Three things here too:

1) dividends are well covered at 5.19x est for 2012

2) return on capital is 11.5% versus the industry which is very good

3) finally using Benjamin Graham formula implied valuation is 1538.45p current price calculated on 1080.50.

My opinion is to buy below 1000p and hold for the long term as this is a safe long term bet with steady small income whilst the share price takes a long time to recover.

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anil kumar

Nov 05, 2012 at 12:28

BG Group just raised a syndicated credit facility of $ 3 Billion.Dumb Bankers ??

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Sud via mobile

Nov 05, 2012 at 12:38

Below 1000p means I will buy at 925p and hold and forget for five years in a sipp or isa, reinvest the dividends subject to fees. Otherwise there are plenty of other large caps to consider such as BSY, which DI bought on a drop, STAN, ISAT. Yes these have all had recent drops and bounces but knowing a good valuation is key rather than just having a guess. EMG is a good example when a share price drops and bounces but will take a long time before it gets to its implied valuation, except this share has very poor safety on its dividend as well as other deep fundamentals that would imply to me to keep away til it's priced at 50p, then it would be a serious tale over target, but why speculate when long term quality is what is needed when 10k is all you have to invest with!

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Sud via mobile

Nov 05, 2012 at 12:43

Apologies for the typo, using the iPhone to add my reply, not recommended lol

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wayne roberts

Nov 05, 2012 at 14:54

If BG goes to £1.00 will it be a good buy then? It will be way undervalued according to Benjamin Graham so surely it will be good to buy it then?

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Sud via mobile

Nov 06, 2012 at 08:51

An interesting article on Bloomberg

"Massive Breach

Take, for instance, an intrusion last year at BG Group that has never been disclosed to shareholders. The company, which posted $21 billion in revenue in 2011, discovered a breach in its computer networks described as massive by four people knowledgeable about it, with vast quantities of data taken.

The hack targeted information such as geological maps and drilling records, as well as far-flung data from the company’s worldwide network going back at least a year, that could impact sensitive deals, according to one of the people who worked on cleaning up the intrusion.

Despite the scope of the breach, it was kept under wraps inside the company, according to three of the people. Most of the company’s information-technology staff weren’t told about the intrusion, according to one of the people, who described how colleagues at adjacent desks had no clue anything was wrong.

Risk Factor

Since the end of 2010, Reading, U.K.-based BG Group has included for investors a one-sentence risk factor in its regulatory filings: “Information security breaches may also result in the loss of BG Group’s commercially sensitive data.”

BG Group spokesman Mark Todd said he wouldn’t respond to “rumor and speculation, or upon media stories based on anonymous sources.”

The company “has robust security measures across its business to protect its information technology,” he said in an e-mailed statement. “BG Group fully complies with all relevant market disclosure guidelines and regulatory requirements. When we have something material to announce, we do so via the established disclosure channels.”

Companies listed on the London Stock Exchange are under rules, similar to those in the U.S., to disclose to investors anything that will have a material impact on the company’s financial situation, says Chris Hamilton, a spokesman for the Financial Services Authority, the U.K. financial watchdog."

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Sud via mobile

Nov 06, 2012 at 08:56

For additional info contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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Sud via mobile

Nov 06, 2012 at 08:59

CORRECTION to last post

editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.net;

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