Newspaper article The Evening Standard (London, England)

Patience Is the Bottom Line on Share Buying Now; City Comment

Newspaper article The Evening Standard (London, England)

Patience Is the Bottom Line on Share Buying Now; City Comment

Article excerpt


ONE of the more reliable rules of journalism is that if something happens once it is an aberration and can be safely ignored. If it happens twice it is a trend and should be milked.

Yesterday morning Lord Sterling, chairman of ports and shipping giant P&O, bought 250,000 shares in his company at a cost of not far short of pound sterling500,000.

This, remember, was his own money. He spent it in the belief that the shares had sunk to a ridiculously low price - depressed, albeit temporarily, by the decision of his finance director to resign in order to return home to Australia.

Because Lord Sterling runs the company, such purchases have to be publicly disclosed. But as significant was the revelation yesterday by another prominent industrialist, a long-time leader of FTSE 100 companies, who said he had just bought himself a portfolio of "blue-chip reliable companies who will certainly be with us in five years' time". The reason in both cases was that shares are cheap at this level, even if shortterm they may get a bit cheaper.

Both are extremely shrewd men who have built their careers on knowing value when they see it and knowing when to be patient.

They also see clearly that be any sensible historical yardstick a lot of top quality shares are now ridiculously cheap.

Sadly, private investors rarely take this long view. One of the more predictable but nevertheless depressing facts to emerge in recent weeks is that new privateinvestor investment in equities has collapsed. There is nothing going into ISAs and mutual funds, no private-client direct investment, and even the single-premium business of the life offices has dried up.

Once again, private investors buy heavily when shares are dear and skulk on the sidelines when shares are cheap.

But might they not soon be even cheaper? …

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