Cutting our losses on Dominos Pizza and Dignity

[Itsallaguess]

I believe that my approach of applying limits to my investments has been useful to me in two ways:-

a) The lower limit of about £3,000 is driven by what I consider to be the minimum cost effective trading volume. I would never want to buy fewer shares than that due to the effects of stamp duty and commission. It also seems a sensible first step in building a larger position, allowing time to get experience with a stock before further adding to that position.

Is there a reason that you include stamp-duty in that consideration, given that the 0.5% stamp duty is payable on any amount of invested-capital at all?

There doesn't seem to be a proportionate advantage with any stamp duty costs as there clearly are with fixed trading commission.

I have a lower limit too, but it's much lower than £3000. If you're able to take advantage of any 'Regular Trading' schemes that your broker allows, then you can keep trading costs at a really low level - often just a couple of quid. If I can keep trading costs under 1% then I'm usually happy to invest, and that's certainly the case with a lower level than £3000 for me.

Some of the cheap 'Regular Trading' schemes look like they require multiple and regular investments, but I've always found that I can allocate a share for one of the cheap-trading days and then just cancel the entry after the trade has gone through. This is certainly the case for all three of the brokers that I use, so it might be something worth investigating if trading costs are important to you for lower-level investments.

b) My limits are also driven by my personal approach to loss management, where I review the situation should I get to be 10% down (including all dividends received) and may decide to either sell, average down, or sometimes just hold. This process is designed to stop a 10% loss becoming a 20% loss, and then a 50% loss etc. and then becoming trapped in the stock just waiting and hoping for a recovery. In this way I hope to keep the cost to me of a failed stock pick to not much more than a few hundred pounds.

Do you run a comparison of a potential 10% share loss against general market weakness? I only ask because I imagine there are times when large numbers of portfolio-holdings might drift lower along with market turbulence, and I wondered if you've got any controls in place to highlight such events to you, or would that simply be part of your 'sometimes I just hold', where you'd consider general market issues at that point, and take that into account?

Cheers,

Itsallaguess

[TheMotorcycleBoy]

I believe that my approach of applying limits to my investments has been useful to me in two ways:-

a) The lower limit of about £3,000 is driven by what I consider to be the minimum cost effective trading volume. I would never want to buy fewer shares than that due to the effects of stamp duty and commission. It also seems a sensible first step in building a larger position, allowing time to get experience with a stock before further adding to that position.

Is there a reason that you include stamp-duty in that consideration, given that the 0.5% stamp duty is payable on any amount of invested-capital at all?

But not with AIM shares surely they are 0% SD? I've also heard (so I could easily be wrong!), that some of the Channel Isles registered ITs attract 0% SD.

I have a lower limit too, but it's much lower than £3000.

What is yours out of interest? When Mel and I first started PI it was about £800 for AIM shares and about £1000 for anything else. Now as our portfolio grows we are upping the lower limit to £1200-£1500 or thereabouts.

[GoSeigen]

I have a lower limit too, but it's much lower than £3000.

What is yours out of interest? When Mel and I first started PI it was about £800 for AIM shares and about £1000 for anything else. Now as our portfolio grows we are upping the lower limit to £1200-£1500 or thereabouts.

He already answered that. He said fees no more than 1%, so at Selftrade for example, with £1.50 commission, he would be happy to buy £150 worth of stock. I do the same sometimes but generally go for £300 or more.


GS

[TheMotorcycleBoy]

I have a lower limit too, but it's much lower than £3000.

What is yours out of interest? When Mel and I first started PI it was about £800 for AIM shares and about £1000 for anything else. Now as our portfolio grows we are upping the lower limit to £1200-£1500 or thereabouts.

He already answered that. He said fees no more than 1%, so at Selftrade for example, with £1.50 commission, he would be happy to buy £150 worth of stock. I do the same sometimes but generally go for £300 or more.


GS

Wow Selftrade sound cheap. We use iWeb which charge a fiver per trade. I *used* to think they were cheap.

[Itsallaguess]

I have a lower limit too, but it's much lower than £3000.

What is yours out of interest? When Mel and I first started PI it was about £800 for AIM shares and about £1000 for anything else. Now as our portfolio grows we are upping the lower limit to £1200-£1500 or thereabouts.

He already answered that. He said fees no more than 1%, so at Selftrade for example, with £1.50 commission, he would be happy to buy £150 worth of stock. I do the same sometimes but generally go for £300 or more.

In reality I tend to set a lower-limit of around £1500 nowadays, but that's more to do with the fact that I'd simply be trading smaller amounts much too often with accumulated dividends etc., so the accrual time-scale is of much higher importance to me now than the actual trading costs, especially as the costs themselves (except for stamp-duty) might be seen as being such a tiny part of such trades.

Also, in addition to the above, some brokers now give regular trade-credits as part of their shares-account charging-structure, so using those trading-credits in the most efficient way is also a more important factor to me than it ever used to be.

It's funny how our requirements change as portfolio's mature, so I think allowing ourselves to be flexible and take advantage of what's available via different options is much more important than trying to come up with a rigid method that we might think suits all occasions.

Cheers,

Itsallaguess

[PrefInvestor]

Hi itsallaguess and themotorcycleboy,

Several points:-
a) My broker doesnt do cheap trading days, only discounted commission based on the number of trades that you've done in the last month. Mostly its £11.95 a trade.
b) Mostly I am buying ITs (stamp duty on only some of these) or ETFs (no stamp duty on these)
c) Low spreads on ETFs
d) I tend to avoid AIM stocks (= russian roulette !!).

I did some research some while back that that I posted in another place that showed that for me £2,500-£3,000 was the minimum that could deploy without it significantly affecting your average. Hence my reason for that figure.

ATB

Pref

[TheMotorcycleBoy]

So I'm still thinking of doing more fundamental and background analysis of DOM. After seeing this:

https://uk.reuters.com/article/uk-domin ... R71QL?il=0

So originally we had two positions one bought at 331p p/share and another at 260p p/share. Then we "cut our losses" at 239p p/share.

In the light of the speculation re. David Wild's departure, then if all my research comes in and is still positive, I'll consider re-opening a position at between 220-240p over the next few months if Mr. Market obliges.

I know it seems crazy to go in and out of this firm, potentially. But we (me and Mel) are still learning the PI game. TBH our portfolio is still much better off after the DOM sales we made, the funds got redirected immediately into BUR (Burford capital) and SPX (spirax sarco), both quality outfits at present which have performed very well since.

So who many of you lot, have sold out of something or been burnt otherwise; only for time to past and for you to then open another position in the same company?

Matt

[PrefInvestor]

Hi Again itsallaguess and themotorcycleboy,

If I might add some clarification to my previous post (which was done in haste as lunch was imminent !).

In terms of the minimum trading amount question. Spread and stamp duty (if applicable) apply on every share you buy and cannot be avoided. Commission is a one off fee the effect of which can be reduced by making a larger purchase.

Whether a given purchase is “cost effective” or not is likely a personal and subjective issue. But for me if the total of all fees payable means that the average price paid is significantly higher than the bid price at the time of the purchase then I consider that to be a bad trade, as the stock price has to go up a lot for me to just get my money back.

My previous research was done using HSBA where as of today my personal view is that I would not want to buy less than ~400 shares (at £11.95 commission). For other stocks the figures will be different but I still use £2,500-£3,000 as my rule of thumb.

My investment spreadsheet calculates the breakeven price for any stock that I intend to purchase (ie the amount the SP has to get to before I breakeven) and if I consider that this figure is too high then I either buy more (to reduce the commission effect) or do not proceed.

Obviously if you are with a broker that offers reduced or commission free trading days then the number that you can buy without incurring this effect will be reduced significantly, and good luck to you.

Itsallaguess – No I don’t do my 10% down review procedure in situation where the cause is obviously general market weakness. It is focused purely on obvious underperformers eg the likes of INTU, KIE, CNA and VOD etc. though if some stocks are performing significantly worse than others during a period of market weakness I might choose to review them then.

ATB

Pref

[StepOne]

So who many of you lot, have sold out of something or been burnt otherwise; only for time to past and for you to then open another position in the same company?Matt

A completely difference situation, but I first bought Encore Oil in 2007/8 when there was lots of excitement about the gas storage capabilities of one of its depleted fields. Unfortunately, that turned out not to be feasible, and the shares plummeted. I eventually sold out early in 2010 losing 2/3rds of my money.

In the next 10 months they had drilling success at a couple of wells and the shares ten-bagged! Talk about missing the boat - I was gutted, and, stupidly, bought back in, pretty much at the top, as they started to slide, and were eventually bought out by premier in 2011, with me losing almost 50% second time around.

Not my finest hour.

StepOne

[PrefInvestor]

Hi Matt,

Yes making a loss on something does trigger a kind of "aversion instinct" in me, makes me recall the days when I just watched the stock doing poorly. I have to say that I tend to keep clear of such past failures and invest elsewhere. There have been a couple of times when I have overridden this instinct, one was with VOD - with very poor results, the other with CAML - which is still ongoing but more encouraging.

ATB

Pref

[Itsallaguess]

Share news - Dominos Pizza share price falls 'after reporting flat pizza sales'....

Cheers,

Itsallaguess

[GoSeigen]

What is yours out of interest? When Mel and I first started PI it was about £800 for AIM shares and about £1000 for anything else. Now as our portfolio grows we are upping the lower limit to £1200-£1500 or thereabouts.

He already answered that. He said fees no more than 1%, so at Selftrade for example, with £1.50 commission, he would be happy to buy £150 worth of stock. I do the same sometimes but generally go for £300 or more.


GS

Wow Selftrade sound cheap. We use iWeb which charge a fiver per trade. I *used* to think they were cheap.

Ah but for your fiver I think you get to choose when and at what price to do the trade, i.e. that is the "at market" trade price. For £1.50 at Selftrade you get lumped together with everyone else and the trade is at a fixed, predetermined time. I'm pretty sure that in general I lose more from a poor price than I make in doing the trade before accumulating enough for trading "at market". So it's not really the bargain it seems.


GS

[TheMotorcycleBoy]

Share news - Dominos Pizza share price falls 'after reporting flat pizza sales'....

Cheers,

Itsallaguess

I know! I linked a ref to a covering story in my first post on this thread for today.

If I do go in I plan on doing better research first. I imagine the "reporting flat sales" bit comes from spin generated by DOM themselves TBF.

Matt

[TheMotorcycleBoy]

Hi Matt,

Yes making a loss on something does trigger a kind of "aversion instinct" in me, makes me recall the days when I just watched the stock doing poorly. I have to say that I tend to keep clear of such past failures and invest elsewhere. There have been a couple of times when I have overridden this instinct, one was with VOD - with very poor results, the other with CAML - which is still ongoing but more encouraging.

ATB

Pref

Yes, it's a tough call isn't it?

TBH there's something about David wilds attitude I dont like.

As well as pissing off 3 CFOs at DOMs, didn't be nearly kill Halfords when he was CEO there?

[GoSeigen]

So who many of you lot, have sold out of something or been burnt otherwise; only for time to past and for you to then open another position in the same company?

I have often done this, usually regretted it. With growing experience I am waiting ever longer before adding to or restoring a losing position. I am learning instead to slash those positions and just wait and see. Even if the price bottoms and rises, in many cases it falls back again to the point where you wanted to buy earlier. There are two big advantages to buying at this point rather than earlier:

1. You have had your cash for longer to spend on better opportunities in the meantime. All you've done is miss one potential opportunity. In exchange you get a shot at any of the many other opportunities.
2. The trend in the share you are buying is now demonstrably upward. Those value investors who by pure luck bought at the bottom have been proved right. They will feel more comfortable holding at higher prices. Trend followers also feel comfortable buying at higher prices because the trend is their friend. The entire psychology is more positive than earlier in the downward trend.


Re. DOM, as I said before, I think this share is heading for 160p. The price action has looked poor since then, still trending down. I may be wrong, but it would a single wrong call on a share that looks bad. There will be plenty of other promising opportunities.


It's hard for me to do trade this way, even though I sense it is right. You are perfectly entitled to do the opposite!



GS

[GoSeigen]

Share news - Dominos Pizza share price falls 'after reporting flat pizza sales'....

Cheers,

Itsallaguess

I know! I linked a ref to a covering story in my first post on this thread for today.

If I do go in I plan on doing better research first. I imagine the "reporting flat sales" bit comes from spin generated by DOM themselves TBF.

Matt

I think you'll find Itsallaguess was making a cheesy joke.

GS

[TheMotorcycleBoy]

Share news - Dominos Pizza share price falls 'after reporting flat pizza sales'....

Cheers,

Itsallaguess

I know! I linked a ref to a covering story in my first post on this thread for today.

If I do go in I plan on doing better research first. I imagine the "reporting flat sales" bit comes from spin generated by DOM themselves TBF.

Matt

I think you'll find Itsallaguess was making a cheesy joke.

GS

In the immortal words of Butthead,

"You're pretty cool, GoSeigen Beavis."

[westmoreland]

disappointing update. the UK continues to be an outstanding business, but they are struggling to get the formula right in international markets. it's a small part of the business, but continues to make losses. i can see them exiting switzerland at some point. i think the outlook for the likes of sweden, iceland and germany is more positive.

i thought the dispute with franchisees would be resolved relatively quickly, given the huge returns they make, when compared with rivals. i didn't quite appreciate the clout the major franchisees have now that they have consolidated (2 franchisees control hundreds and hundreds between them).

i'm continuing to hold, but i would like to see the ongoing franchisee dispute solved without conceding too much margin ASAP.

[TheMotorcycleBoy]

disappointing update. the UK continues to be an outstanding business, but they are struggling to get the formula right in international markets. it's a small part of the business, but continues to make losses. i can see them exiting switzerland at some point. i think the outlook for the likes of sweden, iceland and germany is more positive.

i thought the dispute with franchisees would be resolved relatively quickly, given the huge returns they make, when compared with rivals. i didn't quite appreciate the clout the major franchisees have now that they have consolidated (2 franchisees control hundreds and hundreds between them).

i'm continuing to hold, but i would like to see the ongoing franchisee dispute solved without conceding too much margin ASAP.

But presumably abroad is the only place that they can grow in?

I mean I ate my first and hopefully my last domino pizza about 25 years ago pulling a late one at work in MK. This country's saturated the pizza market. In my nearest small town/big village there's about 3 or 4 places already that I can dial a pizza from. DOM won't get off the ground here.....nor in many other places.

So I guess that's why the market is fixated on the continental side....what do you reckon?

[gbjbaanb]

I read the Shares Magazine article on DPEU - apparently the eastern european market is catching up to us in terms of pizza and other food-for-delivery. The biggets problem is gthe traffic and roads, so they were putting pizza places strategically to capture a surrounding area "castles" they called them.

Anyway, it did seem to be doing very well, until Erdogan got in (DPEU for some bizarre reason reports in Turkish lira) and the price converted to sterling collapsed.

Western europe may not have the same kind of expansion potential any more, or too much competition from the tech app people.