Signs of a bumper year for share pickers
WESTERN MAIL - 07/01/05
by Sion Barry
Malcolm Stacey, director of the Tenby-based investors' website Sharecrazy.com,
looks at the chances of getting rich on shares in 2005.
Few armchair punters who dabble in shares have done well over the past
five years. Though there's been a recent big improvement in the Footsie,
the list of Britain's biggest public companies, the index is still nearly
a third below its previous best of 6,900.
Yet the economic cycles say that a new share boom is now well overdue.
It is very rare to get three poor years on the Stock Exchange - never
mind five. These cycles are, rather amazingly, partly based on sun-
spots. Lots of solar activity leads to good harvests and these bonanzas
quickly influence all areas of the economy - including banking, travel
and shopping. And though they sometimes arrive late, these very respected
forecasts of upturns and down swings in stock prices normally prove
very reliable.
And there are other signs, too, of a bumper 2005 for share pickers.
Falling house prices can be devastating for people who're rooted to
the spot because of negative equity. But I've noted that when house
prices tumble, share prices rise and vice-versa. Why? Because a booming
property market leaches money away from shares and into buying homes
to rent.
Another reason to expect a new glittering share market is that most
people who trade shares regularly are over 50. Most of this older group
now have more money to invest. They sell their unmortgaged three-bed
houses and move into small flats. They invest for their offspring. And
they have more time to watch the minute-by-minute progress of their
shares on the internet.
So most shares are set to rise next year. But which ones will do better
than the others?
I believe oil companies will continue to make strong profits. The black
stuff is getting scarcer and we all know what happens to prices then.
Drugs companies should also climb nicely, as our car, telly and junk
food-loving population become less healthy or simply older.
But I think the best performers will be hi-tech companies, especially
those selling stuff and services over the internet. Many of these companies
were battered by the "techno crash" of five years ago. The
survivors are leaner and fitter - and are expected to blossom in an
ever more computer-obsessed future.
Companies I will avoid are the high street stores. Quite a few are
struggling now, Marks and Spencer for instance. They're threatened by
internet selling, but more importantly, people are being forced to cut
back on casual spending because of spiralling credit card debt.
Other firms, which won't have my support in 2005 are the airlines.
They'll continue to be hit by rising fuel costs and intense ticket prices
competition. And the threat of terrorism is sadly never far away.
But even among the favoured sectors, there'll be some firms whose share
price will buck the trend and fall.
So how do you ignore the duffers and pick winners? Well, my own technique
is to read up as much as I can on a share I fancy - and then go to bed.
In the morning my subconscious, doubtless calling on snippets of forgotten
information, gives me a firm "yes" or "no". I call
it "an educated gut instinct" - and it works for me. Good
luck for your share picking in 2005.
Malcolm Stacey is author of The Poolside Tycoon.
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this article on The Nation Website of Wales
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