Qualiport

The Qualiport could be renamed

Should the Qualiport be renamed the DefensivePort? The extreme volatility seen across world stock markets in the past month has seen the Qualiport down but far from beaten. In fact, yesterday, amidst what many pundits initially were predicting as the crash to beat all crashes, the Qualiport actually finished up 0.6% versus the Footsie's fall of 1.5%. As was reported in yesterday's Daily Fool, leading the way higher was good old Marks & Spencer.

We have seen and heard the so called experts recommend a flight to safety for investors. I think of such people as nothing but day traders. As the markets look set to head upwards again after the recent correction, those same pundits will be urging investors to buy anything and everything, almost regardless of the quality of the company.

Here's the scenario. City "expert" James Brough-McGregor says:

Tuesday morning, September 1st 1998. The Dow Jones Industrial Average has just fallen 512 points. It looks like things are going to get pretty messy, the global economy is shot to pieces, Russia is doomed, and that's not forgetting about the Asian problems. We recommend selling all equities and putting the cash under your bed. The market is not a safe place to be invested at the moment, and will remain that way for the foreseeable future. Having cash under your bed in the safest place for it. The UK banking system is about to fail, and if that don't get you the millennium bug will. We recommend you sell the lot and lock in the profits made since our last buy recommendation.

Wednesday morning, September 2nd 1998. The Dow Jones Industrial Average has just risen 288 points. This could be the start of the greatest ever bull run the world has ever seen, and buying opportunities abound. Notwithstanding that we are still recommend leaving a little bit of cash under your bed, we think the millennium is a thing of the past, many shares have been knocked down to prices far below their true value, and Asia is a far away place. For all those investors who took our advice (yesterday) and fled the country, get back here fast and start buying some shares. Buy, buy, buy.

The bottom line is that you can't time the market. Which way will it go tomorrow? I certainly don't know. As for where it will finish next week or next year is anyone's guess. What I will say is that it will continue on its inexorable upwards trend. Look at any graph of the stock market over a long period of time, and what you see is a squiggly line which starts in the bottom left hand corner and makes its way up to the top right. Trying to buy on the dips and sell at the peaks is impossible and very costly. Our City "expert" saw the market only fall 1.5% yesterday, and it was not the bloodbath he expected. Many of those shares he was advising to sell would have closed today at a level higher than yesterday's opening price. The whole buying and selling affair would have actually cost you money.

At volatile times like these, it is worth asking yourself the question of why you are invested in the stock market. Remember, this is money that you don't intend to touch for a minimum of 5 years. One day, one week or one month out of 5 years is such a minuscule time frame over which to judge the performance of your portfolio.

Measured over a longer time frame, shares are the least risky of investment opportunities, yet provide the greatest rewards.

That's our little secret, Fools. Make sure you don't tell the City "wise" -- we'll keep this one to ourselves.

Today the Qualiport lost ground in a rising market. Just four letters explain why -- EMAP. Our media company lost 7.3% in one fowl swoop as the shares plummeted 74p to 940p. At that level they are a full 20.7% below our buying price of 1185p, not taking into account the initial buying charges and bid to offer spread. The Qualiport numbers as quoted on this site, of course, take those important "hidden" costs into consideration.

The reason for the fall in EMAP's shares is relatively simple to explain. Whether it is justified is another thing. We will only know the answer to that in a number of years' time. Sometimes I wish I could be transported into the future, just to see whether I'm right or wrong. Errr... then again maybe I'll just stay put, as some of those share prices 20 years out will be scary, some companies wouldn't exist and others will necessitate the columns on my spreadsheet being substantially widened.

For EMAP to really prosper, they are somewhat reliant on a buoyant economy. In the "risks" section of the original EMAP buy report of April 8th, I wrote:

"Traditionally, publishing has been seen as a cyclical business. When things are going well, so are publishing companies. Advertisers will advertise, consumers will buy the magazines, and readership will grow. When things are not going so well, consumers are likely to sacrifice luxury items such as their monthly edition of FHM. EMAP are concentrating on building up their brands, in the hope that quality and brand leadership will help see them through the bad times. However, on the down side, the reading public can be fickle, and leading publishing titles can easily become also rans if editorial quality is not maintained and continually improved."

That just about sums up the EMAP share price fall. Although this is hardly a recession, the perception is that we are about to enter one. I'm no economist, so I can't predict which way the UK is headed. In fact, the economists themselves can't agree on whether the next move in interest rates is up or down, so what hope has a Fool like me got? What I do know is that EMAP retain a stable of high quality publications and radio stations, as well as their other business divisions.

A profit warning from outdoor bill poster advertising company Maiden Group saw most of the media sector follow in the footsteps of the fall in Maiden's share price. EMAP was no exception. Maiden said that there has been a gradual decline in advertising spending, and they expected that to continue. The thing that really hit the media shares today was the fact that Maiden traditionally need longer lead times to set up their campaigns. That could indicate that other companies who are dependent on adverting income could yet see a slowdown in spending. That's the theory anyway, and share price losses were very much indiscriminate. Only time will tell whether the losses at Maiden were company specific or industry specific. Since we see that nothing about the EMAP business has changed, naturally we remain firm holders of the shares. No stop loss limit for us, although some Fools may like to debate this on our investment strategies message board. Other Fools may want to visit the EMAP message board to prophesise over the fate of the company.

We will soon be unveiling some exciting developments for the Qualiport, including buying some more great companies. Make sure you stay tuned, Fools, as we continue our fight to beat the market. We're succeeding so far, but the real test is yet to come. When the market calms down a little, we will tie up our "How To Value Shares" series, but to access past reports, don't be afraid to click on the Qualiport archives.

Keep calm, and Foolish.

Bruce Jackson (TMF Googly)

Qualiport Numbers

Today's Numbers       Date    02/09/98


                   Day     Month    Year     History
Qualiport        (0.48%)   0.10%   30.67%    33.62% 
FTSE 100          1.29%   (0.26%)   1.95%     4.29% 
FTSE All Shares   1.40%   (0.58%)   0.65%     2.77% 


Qualiport Stocks

Last Rec'd  Total # Security  In At    Current  Change
 17/04/98    337      EMAP   £11.998   £9.350  (22.07%)
 11/05/98    736      MKS     £5.604   £5.390   (3.81%)
 19/12/98   1565      RTO     £2.582   £3.560   37.88% 
 17/07/98    595      ULVR    £6.804   £5.770  (15.20%)


Last Rec'd  Total # Security  In At     Value    Change
 17/04/98    337      EMAP  £4043.37  £3150.95 (£892.42)
 11/05/98    736      MKS   £4124.37  £3967.04 (£157.33)
 19/12/98   1565      RTO   £4040.63  £5571.40 £1530.77 
 17/07/98    595      ULVR  £4048.38  £3433.15 (£615.23)


Cash:               £67.82
Current Total:  £16,190.36