Why Burberry’s woes may be good news for investors

Glad Mr Buxton is not managing my money...

If I had Burberry in a portfolio and it was down 20% I might say something like 'sorry' to my investors?

I am new to share dealing, and I wondered if someone could explain to me why after so much growth over the last 5 years and a D/Y of only 1.8%, why would a share like this be attractive to an investor?? I was always told to look at a D/Y return of over 4%??

"May be good news for investors"? The trend line for Burberry's shares has been firmly down for the last six months. The shares lost 26% between April and July, and have now lost a further 5%. Do the "professionals" never operate a stop-loss policy?

Almost anything can be seen as a "long-term growth stock" with "headwinds". If you never sell it, you never make a loss.

If you want something done, do it yourself. I sold my Burberry shares at 1265p. They are now 1088p. I would need a load of convincing that I didn't do the right thing.

Mr Turner - "So much growth over the last 5 years" = "attractive to an investor". That's all you need to know.

Your 4+% dividends may well come at the expense of a 10% capital loss. Buy a copy of The Times. Go to the page at the end of the Business section which list share prices and dividends. Highlight all the dividends over (say) 4.5%. Put those in a dummy portfolio somewhere on the web (I use Moneyextra, but there are lots of others) - buy a nominal £1,000 of each share. Monitor them for 6 months. A few of them will do very well. Most of them will lose money, even taking the dividends into account. That's not what I call investing.

Capital gains will beat dividends 10 times out of 10. Capital gains are also taxed less heavily than dividend income, because you are allowed a higher capital gains tax allowance each year.

If it is such a good long term growth, why was Burberry dropped from Citywire Top Stock list in August?

It is a recurring fantasy among growth investors that there is a vast universe of stocks that will grow at double digit rates forever. That is more or less what would be needed to justify Burberry, Apple and many others.

In the 1950s and 1960s it was the Nifty Fifty stocks that were must buys at any price. Burton Malkiel's book, A Random Walk Down Wall Street will disabuse you of many such quaint notions.

Strong balance sheet, huh?

I want to see the performance of Mr. Buxton if he is willing to pay 18 times earnings (after the price drop) for a strong balance sheet alone. Such valuations must be supported by a strong balance sheet AND growth. I can buy a strong balance sheet of a utility company for 4 or 5 times earnings.

I also find it funny how they use this opportunity to help their ego and comment on how much they made on some small trades earlier in the year (or the "discount" they bought it at - sic!), but do not comment on how much they have lost so far on this investment as a whole.

Congratulation on good timing Mr. Hall and your discount purchases, haha.

Personally I can't see what anyone sees in shares like this. The company is all smoke and mirrors, just some ad men in front of some sewing machines. I like to try and put my money where it's put to uses that have more of a social component.

Shares like this can make you money as well as lose them if you are a momentum trader. I have found that trends are only any use at all in strongly trending markets when shares with high alpha outperform (or underperform) the market. Chartists claim to spot this scientifically. I just call it gambling and have not done it in the last few years of largely directionless markets. There is no fundamental case for buying such shares although there may be a fundamental case for shorting or for a pairs trade. Perhaps some of the other high PE retailers have not yet factored in the collapse of consumer demand for fashionable fripperies. I don't know if they have or not, not having the cash to spare to motivate me to check.

Just caught up with this excellent article on Citywire which is about small cap growth stocks. It makes sense to me and I actually own Raven Russia:

http://citywire.co.uk/money/david-kempton-my-pick-of-growth-stocks/a617543/

The author implicitly agrees about avoiding stratospheric PEs.