Shares: the reasons that I bought

Buying Shares - the explanations for doing so...

I recently read an article on an investing website that said that you should state your reasoning for investing in the various companies in your portfolio. So here goes:

My first share investment buys

Barclays, RBS, and Lloyds - I invested these banks in the summer of 2010. At that time the prices of the various shares were cheap relative to the book value on the balance sheet. The balance sheets particularly for Barclays tended to suggest that the price should have been double what it was.

In the case of RBS and Lloyds my reasons for investing was fairly simple. Currently the biggest shareholder in these companies is the Government. It would be political suicide for the Government to sell these companies at a loss. Since I bought them at a price well below what the Government bought them, I figured that these are some of the safest stocks in the world, as the Government would not let them fail - ironically encouraging the 'too big to fail' view of UK banks.

Furthermore, it was rumoured that in 2013 RBS and Lloyds will start paying a dividend. In the mean time I expect the small dividend of Barclays Plc to begin to increase. All three Banks are therefore longterm growth prospects. RBS and Lloyds - I intend to sell half the shares once they've doubled in value. Barclays is a long term divided provider - after repeatedly good results I'm hoping to see a growth in the dividend per share over the next few years.

Investing in mining shares

Centamin, Avocet Mining and Lonmin - these three miners are reflective of a large position in the mining sector. All three have a commonality in that I invested once there had been some sort of disaster in their particular industry, causing a large dip in share prices. Lonmin had problems with strikes in South Africa - that I believed must come to an end. Centamin, a gold miner located in Egypt had problems with supplies. I reasoned that supply issues tend to be short lived and the large price fall did not justify the true value of the company considering the strong balance sheet of the company.

Investing in blue chips and AIM

Debenhams - this is the second largest clothing retailer in the UK. The purchase was within an ISA stocks and shares trading account, thus protecting the dividend income (and capital gains) from taxation. On purchase the company paid a generous 3.5% dividend yield. The company is showing a good transition to the Internet whilst retaining its market share in bricks and mortar.

Morrisons - as well as paying a generous dividend, paid into my stocks and shares ISA account, Morrisons has done the most investing in terms of utilising their store space out of all of the big four supermarkets. I see this investment in 'store experience' eventually paying off in terms of share price growth.

BT - this telecoms company is a solid dividend paying stock. BT is currently on an expansion programme, building their wireless and cable networks. BT are also looking to buy up rights to various sports tv and seem to be edging their way into that market. Whilst the company grows, I'm happy to enjoy a small dividend yield in the meantime.

Hornby - I originally made my investment into Hornby after they had a poor period of selling over the London Olympics. I looked at the company's balance sheet and, whilst a relatively small company it had a long and strong track record or producing cash to pay to shareholders. I don't expect anything special from this share - rather it is an attempt to reduce the volatility in my portfolio.

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