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Ashtead: It's Illogical and It's Daft.

By Malcolm Stacey | Saturday 8 March 2014


Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


Hello Share Fans: There's no getting away from it. You just can't trust the obvious in Shareland

Just when you think you are making a really safe play, based on sound common sense and logical reasoning, the opposite happens.

Take a recent example of mine. I invested a little money – a bit less than I normally do – in a great company called Ashtead (AHT).

I say it's a great company because people who bought Ashtead at the right time could now be sitting on a ten bagger (more or less). I've lost count of the number of bags to be honest.

I myself am enjoying this share as a fourbagger. I thought about investing a lot more in them recently. I failed to do so - and missed out on a 15% rise on their latest figures out a few days ago.

Why did I not invest more money?  Because Ashtead make their money by hiring out tools for the construction trade (and also other industries). And as we all know, the building world has been suffering lately because of the lack of new homes being built. This is caused mostly by the reluctance of the banks to arrange mortgages unless you have mountains of money as a deposit.

And because nobody is earning proper money any more, they can't afford huge deposits. So builders are not building, and self-builders are not building. So why is Ashtead, hirer of plant and tools, making so much money? A complete mystery.

This is just one instance of many I could give you where very careful reasoning about a company's future prospects can all go very long. It is illogical and daft – but so is the wonderful world of shares.

The lesson then, chums, is to be cautious about investing too much – or selling too much - on what you believe to be sound common sense.

Be very cautious about 'certainties'. There aren't any.

God bless.



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Comments

2 comments

  1. Beware also of Newtons 26th law which states :-

    When you sell lloyds bank shares they climb 5- 10 p in very short order . When you buy lloyds bank shares ,within days they will announce a new multi billion provision to re pay customers they have screwed in ever more complex and inventive ways . Never trust a banker ……. its spelling is just way to close to w……….

  2. That law is the only reliable thing in Shareland, Riders.


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