Important: What follows is not a recommendation to buy or sell T.Clarke. I’m a private investor, storing and sharing notes. Read my disclaimer.
Name: T.Clarke Ticker: CTO Listed: London (FTSE Small Cap) Business: Construction and materials More info: Digital Look / Google Finance Company: T.Clarke website
Key numbers for T. Clarke (10/02/09)
(From Digital Look)
Share price: 125p Market cap: £50 million Debt: None (Net cash £26 million) Range (year): 106.25p / 190p P/E(08/09/10): 12.1 / 6.0 / 8.5 PEG (Latest/Fcast): 0.1 / n/a Year end: 31st December Yield: 9.6%/11.3% Div cover: 1.2 / 1.6
T.Clarke: An interesting income story
Who would buy a construction company in the teeth of a recession? Only an idiot, surely? Only… your humble writer.
Before you click away to read the latest dire economic update on Robert Peston’s BBC blog, let me explain my thinking.
- What are the benefits of corporate bonds?
- What are corporate bonds?
- What causes corporate bond prices to fluctuate?
- The main types of corporate bonds
- Convertible bonds
- Other kinds of bonds you may come across
- Stocks vs corporate bonds
- Historical returns from corporate bonds
- Corporate bond prices and yields
- How to calculate bond yields
- Bond default probabilities: by rating
- Does opportunity knock in the UK retail bond market?
- How to create your own DIY corporate bond portfolio
Have you ever had a cake and eaten it? Thought not. If you’ve been luckier than me, you may wish to investigate convertible bonds.
A convertible bond is – just as its name suggests – one that can be converted into a chunk of the company’s equity at certain times during its life, usually at the discretion of you as the bond owner.
I accept it’s normal to feel frustrated, angry, or even downright stupid when you lose money on your investments.
But what about guilt?
My portfolio’s fall from its peak value in summer 2007 to a low in October 2008 represents a big loss for a 30-something private investor like me: at least a couple of years of after-tax income in cash terms.
More importantly, the losses meant I had fewer options in October 2008 than the year before. I’d originally begun investing to build up a house-buying war chest for when the over-valued housing market corrected itself.
After several years waiting, house prices were finally falling, but my investments had fallen further.
It was my sister who put it simplest and best, when I explained to her my fate:
“Ah, I see. If only you’d sold all your investments and put the money into a savings account! Now you’d have even more money, and you could buy a cheaper house.”
My sister was a 100% right.
Being told what I did wrong by my sister, who takes no real interest in money, might have hurt my pride. But then my emotional state has taken several turns during the bear market. I’ve felt:
- Frustrated: After half a decade of waiting for property prices to fall and saving as much as 50% of my annual after-tax income, I’d thrown away my ticket to the ball.
- Angry: At the world, and at the markets. What were the chances of a once in a hundred year credit crisis coming along just when I was finally getting ready to buy a house?
- Foolish: If I’d thought property prices would fall so far, how could I have missed the connection with the stock market? Wishful thinking, perhaps?
- Guilty: My family background is not a wealthy one, and the money I’d lost was modestly substantial – more than my parents’ life savings. What was I thinking playing roulette with the market and exposing myself to such losses?
Despite these churning emotions, I didn’t sell up in despair. Instead, I kept buying while shares were cheap. I did what history and the likes of Warren Buffett say you should do – hanging in and even buying when others were fearful.
Every week I read a huge number of personal finance and investing articles. I thought you might enjoy a weekly shortcut to the best.
First, my quick thoughts on the week’s news
So the Bank of England has cut interest rates to 1%. While anyone relying on cash savings should already have diversified their income portfolio, it’s still a terrible message to bail out borrowers (even if for the greater good) and punish prudent savers. Even the building societies wanted rates to stay at 1.5%.
- What are the benefits of corporate bonds?
- What are corporate bonds?
- What causes corporate bond prices to fluctuate?
- The main types of corporate bonds
- Convertible bonds
- Other kinds of bonds you may come across
- Stocks vs corporate bonds
- Historical returns from corporate bonds
- Corporate bond prices and yields
- How to calculate bond yields
- Bond default probabilities: by rating
- Does opportunity knock in the UK retail bond market?
- How to create your own DIY corporate bond portfolio
Time for another entry in my corporate bond series, which is taking rather longer than expected to finish. (We need to hurry along to see whether corporate bonds are worth an investment at depressed levels before they’re no longer depressed!)
Note that while I don’t claim to have the last word on shares either, I’ve spent much more of my time studying and investing in shares compared to bonds. As I’ve as I previously explained, I don’t think corporate bonds are attractive usually, so I’ve directed my efforts on shares.
But don’t click away just yet! The reality is most private investors shouldn’t even try to become expert on obscure corners of the bond universe.
I believe we should only be considering the simplest corporate bond investments:
- Investment or high grade corporate bonds
- Funds of investment grade corporate bonds
- High-yield corporate bond funds
Even these aren’t must-haves; generally I believe government bonds are a better investment for private investors than corporate bonds (but note that government bonds such as US treasuries and UK gilts were expensive last I looked).
In this post I’ll explain the most important types of corporate bonds for private investors. In the next part of the series we’ll look at convertible bonds, and then we’ll briefly cover some other kinds of bonds you might hear about, but that generally I wouldn’t invest in.
