The Beginners’ Portfolio Buys Quindell PLC!


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The Beginners’ Portfolio is a virtual portfolio, which is run as if based on real money with all costs, spreads and dividends accounted for.

I started taking notice of Quindell (LSE: QPP) when the insurance outsourcing firm was hit by a negative report (written by someone with a material interest in Quindell’s share price falling) followed by a short-selling attack.

That killed the soaring share price, and things turned down even further when Quindell’s attempt at a main market listing on the London Stock Exchange was knocked back. It wasn’t due to any real shortcomings of the company, but the LSE’s rules require a stable period of three years for a company to qualify — and Quindell has been growing massively, largely by acquisition, and cannot yet show that stability.

The firm was perhaps a little naive, but that’s all.

No main listing

We’ve recently heard of moves to spiff up Quindell’s corporate governance with a longer-term view to another go at a main listing. That has started with the split of the chief executive and chairman roles, and we should be seeing new non-executive directors appointed to the board later in the year.

There are no forecasts yet for Quindell, but the firm’s first-quarter update told us of earnings per share (EPS) of 0.82p (before the 15-1 share consolidation). If that remains constant over the year, we’d see a total of 49.2p in earnings for each of the firm’s post-consolidation shares, and that suggests a forward price to earnings (P/E) ratio of just four!

There are cashflow issues, and I’ll look at them in a future report, but for now I just thought Quindell share were too cheap to miss. But how to buy some when we only have £145 in cash in the portfolio, and no obvious dead ducks that need to be sold?


Well, what I’ve done is top-sliced our Persimmon (LSE: PSN) holding and bought some Quindell (virtually, of course, as this is not a real-money portfolio). Why Persimmon? Well, I think Persimmon has a great long-term future, but the recent almost-criminal undervaluation has worked its way out. And with the 86% appreciation we’ve already enjoyed, we can sell some while remaining invested in the company with a decent sized holding.

The disposal of 30 Persimmon shares raised the sum of £347.30 after dealing costs, and added to our cash of £145.62 that gave us £502.92 to invest.

And that in turn allowed us to pick up 249 Quindell shares at 196.5p for a total of £501.73.

Broken the rules

This has broken our rule of restricting the portfolio to 10 shares, but rules can be bent sometimes, especially when you think there’s a screaming bargain to be had. I’ve also now picked two growth shares for the portfolio, when I’d really wanted to keep it to one — but I really don’t think this is the time to be selling Blinkx.

Anyway, that’s what I’ve done — I’ll bring us an update of how the overall portfolio looks next time.

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Alan does not own shares in any companies mentioned in this article. The Motley Fool owns shares in Tesco. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.