Wednesday, 23 September 2009

MNR.L - A sign of the times

Things have been quite easy on the stock market of late. The index is up from its March of 3500 odd 5200 - the biggest rise ever seen in such a short time. And this has been repeated the world over.

One stock I have tracked all year in this regard is Minerva plc. I bought in at 10p, a company that was in trouble with its finances and a property developer; yet a developer of blue chip London space. I walk past its Walbrook development 9and very cool it is too,) every day and so can see how things are progressing.

I have mentioned it non-stop on blog posts and twitter because of its obvious story. Firstly, the banks would not be so silly as to take it out prior to its buildings being finished, secondly its prime London real estate would only recover in value and finally foreign buyers have been buying into the company for over a year.

It was only ever going to fly and today the shareprice is 44p after new of re-financing yesterday. Having sold down most of my holding at 100% up a month ago I got back in with some funds again when the price was down to 22p. Happy days.

But there are some important reasons behind this lucky strike:

1 - Banks need to lend and have been given QE money to do so, so the chance of a co like Minerva falling over was always less than the market perceived.

2- QE is causing a new asset bubble in property and commodities, so the Real Estate market is picking up a lot more quickly than anyone thought it would, which is helping companies like Minerva.

3. Therefore alot of this gains are down to QE and the mess this is making with the real economy. It saved us from depression, but is going to cause huge mis-allocation unless it is halted in short order; I perceive no chance of that. Which is why I am not selling my share in Minerva today as the backstory has further to run.


P.S. Off to the Bear on business for the rest of this week, back next

15 comments:

The Great Simpleton said...

Interesting.

I tried to get out of commercial property last year but was too late (by a day) as the funds I was in locked their exit doors.

I'll have a word with my IFA about this and keep an eye on what's happening. Maybe a switch out in the near future when I'm in profit might be prudent if there is another bubble.

Richard Elliot said...

I tried to get in when you tipped it at 14p, but the time I had some free funds the price had rocketed to 22p. I decided I'd missed the boat, but there was obviously still a lot more to come.

CityUnslicker said...

To be fair Richard, I thought 35p would be a top until recently; the markets have gone made with Quantitative easing sparking an equity bubble.

Blue Eyes said...

I live for the day that someone knocks down Cannon Street station.

Budgie said...

Brown could easily keep the QE tap on up to the election, to give him the best chance of re-election. Then if the Tories get in, what will they do?

Turning off QE, and cutting government spending, and tax increases, all at once, will be an immense shock. Expected by the ratings agencies, none the less.

It all comes back to the incredible debt debacle created by Brown. If we had been in surplus during the 'boom' we would have had the wherewithal to tide us over the bad times. The Brown debt will stymie Cameron, and be a burden on us for years.

Cityunslicker - many thanks for your share tips. Dabbled in a few in a small way for fun, and now some look good - especially Minerva.

Guido Fawkes said...

Market distortions due to QE are going to be many. Wonder if the new bubble has been factored in.

James Higham said...

Therefore alot of this gains are down to QE and the mess this is making with the real economy. It saved us from depression, but is going to cause huge mis-allocation unless it is halted in short order; I perceive no chance of that.

Do you think we're safe from depression?

Anonymous said...

CU here - Blogger won't let me log in for some reason.

Budgie - yes that is the nightmare scenario now. Will be real tin hats time by the middle of next year if things go on as they are.

Guido - I think many are only just waking up to the new bubble. Without a market correction what is to stop the FTSE hitting 6000. After all teh £ is sinking and QE is casuing asset hyperinflation here and in the US.

JH - I feel for now we have avoided depression. Now it is going to look like the rollercoaster of 1970's stagflation - still massively harming to your welath withouth careful management - and even then bad luck can wipe any of us out.

Steven_L said...

I remember looking up the Minerva tip, and the PPA tip.

I seriously though about putting a wedge in PPA, but on the other hand it looked like I was buying rocks, in Canada, and I convinced myself there was no shortage of rocks in Canada, even though at the back of my mind I knew I would end up regretting it.

I still fancy Punch Taverns for a long term buy and hold though.

tory boys never grow up said...

I think you will find that markets are quite capable of mispricing without Quantitative Easing. This share has been priced well below its net asset value for a long time - and I think the increase in its value is due to the financing being sorted out and it being a potential takeover target - rather than an increase in London property values (although I daresay the irrational markets may start to factor this in before long) - you forgot to mention how much the Minerva share price fell in the first place!

Budgie said...

Socialist boys never grow up said: "... I daresay the irrational markets ..."

You may dare, but you are mistaken. 'Markets' is just the collective noun for the individual decisions of free men going about their business. Only the arrogance of socialism allows you to think you know better than me what my decisions should be.

Measured said...

Do some banks never learn! Piling into commercial property, albeit the easiest option and seemingly more secure at present, ties up the capital. At present companies are refinancing, extending loan maturities; this can only go so far. The FSA as ever has its eye off the ball, enjoying an international role to determine cross border regulation and fussing over the minority whose remuneration was significant. All this will all catch up with everyone. It just takes one domino to fall. QE was a quick fix but the money does not disappear; flows just change. Bubbles burst. Mind your eye.

tory boys never grow up said...

"'Markets' is just the collective noun for the individual decisions of free men going about their business"

So all those speculators backed by the capital of others and paid bonuses if they succeed and not suffering an equivalent penalty if they fail - with the finance coming from banks with a guarantee form the tax payers - and buying mortgage backed securities which their colleagues had engineered to have AAA status (In return for a fat fee) - were just free men going about their business??

I think you will find that it is not just socialists who no longer accept that markets are not always irrational and need some intervention and regulation from time to time. The real grown up debate is about the form that such regulation and intervention should take - not whether it should occur.

For the record I don't think that the intervention should be in the form of interfering directly in the individual markets such as Minerva. But there probably does need to better information provided about the fundamentals of a Company such as Minerva (remember what Adam Smith said about that!) and restrictions on the ability of certian people to enter and distort the market (was Minerva the victim of short sellers (betting with others capital) when its share orice fell from 140p to 5p?

Recognising that market imperfections occur and need to be addressed is not something that is confined to socialists, as Budgie appears to believe, as anyone who has studied any neo-classical economics will appreciate.

BC real estate said...

Hello, thanks for the article. Yes, maybe you're right and we could say that the Europe is safe now and managed to avoid depression. I also agree that an intervention is necessary from time to time, however, the more "bubbles" are caused by such interventions the more we are running in circles of the financial crisis.

Take care,

Jay

CityUnslicker said...

How great was this call, Minerva 120p today.