Investment Club: Share price sails on, albeit a little slowly
On 12 November, 2010, the club bought Scottish & Southern Energy (SSE) for 11.37. The price then hit a high of 12.58, before backing off. Nonetheless, the club, at the beginning of March, was still sitting on a profit. For an exit strategy, the club relies on its paper and pencil analysis, which is looking for a selling opportunity just proud of 15. The volatility shown by the shares on its way to this target has been a bit alarming at times.
Its gyrations have not been helped by the tragedy unfolding at Japan's Fukushima Daiichi nuclear power plant after the earthquake in March and energy regulator Ofgem's sabre rattling at utilities 11 days later.
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Hide AdThe damage inflicted by the earthquake and tsunami resulted in Germany and China suspending nuclear power plant construction. This bodes well for renewable energy investment, in which SSE is a major player.
Our share price was on a downward trajectory from 12.39 to 11.84 until the damaged reactors and radiation leaks were confirmed. The price then jumped to 12.34 before Ofgem chief executive Alistair Buchanan of accused the major energy suppliers of being greedy and misleading customers. The shares slumped to 12. However, the upwards trend remains intact.
The club's gilt investments also seem to have stabilised in spite of worse-than-expected UK borrowing figures of 11 billion in February. This is because the City still expects 2011's borrowing to come in under government estimates of 14bn.
I am less sanguine though. The Chancellor, in spite of all his rhetoric of cutting the budget deficit from 165bn to 80bn over the lifetime of this parliament, is still likely to have debt at 90 per cent of GDP in 2014.
What with our share price hanging on to its uptrend, the City's confidence in the government's economic strategy holding, helping interest rates stay low, the omens for the club's unit price are a bit better than they were.