This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.
LONDON -- What we're doing here at The Motley Fool's Beginners' Portfolio is building a portfolio the way a beginner might go about it. It's not real money, but we're treating it as if it is.
We're making 10 investments of 500 pounds each, taking account of all costs, watching for news of our shares, and keeping a track of the portfolio's valuation in terms of what we'd actually get if we sold it. In fact, we had a look at its valuation a couple of weeks ago.
We're also keeping a watchlist of potential candidates, both to keep track of candidates for the final two slots (and for potential future purchases should we sell anything) and to use as a learning aid; I reckon keeping a watchlist is something all beginners should do.
And since we last took a look at our watchlist, I've come across another two companies I want to add to it. And, of course, we have to remove BAE Systems from it because we have bought some.
The two are Morgan Sindall
Market Cap (pounds)
|WS Atkins||722 million||718||9.2||4.4%|
|TUI Travel||2.9 billion||257||10.8||4.5%|
|United Utilities||4.5 billion||663||16.4||5.1%|
|Morgan Sindall||285 million||591||7.8||6.4%|
|Weir Group||3.9 billion||1,777||12||2.1%|
Morgan Sindall is a company I've admired for a while. It's a construction and regeneration specialist focusing on redevelopment, brownsite construction, urban regeneration, and so on. And its business has been going through a tough patch during the economic downturn.
In fact, we had more bad news about the company this week after it issued a profit warning, telling us that this year's trading will come in slightly below current expectations. Further, chief executive Paul Smith has resigned.
So the forward figures in the table above will be downgraded a little, but there's plenty of room for that and for the dividend to be cut while leaving the shares still looking cheap. There's a small fall in earnings forecast for 2014, too, but at the interim stage on June 30 the company had net debt of only 12 million pounds, which is nothing, really. The next year will be crucial, but is now a good time for the brave to get in?
Weir Group is the other one, and I was alerted to it on Monday when I read the firm's interim update. The company, which provides pumps, hoses, valves, and other equipment to the mining industry, reported slowing growth, and that was enough to cause the price to drop.
But overall, things looked pretty upbeat, with full-year pre-tax profits of between 440 million pounds and 450 million pounds expected, which is in line with broker forecasts. There's not much of a dividend expected, but Weir is one of those "picks and shovels" companies that should see even better days when mining demand improves, so it's definitely one for the watchlist.
I've run out of space to say much about the rest of the watchlist other than to note some price movements. WS Atkins, which I really liked last time, is up 16 pence to 718 pence, and TUI Travel has risen 26 pence to 257 pence. Unilever is up a bit as well, putting on 63 pence to 2,336 pence, but that price-to-earnings ratio of more than 16 still looks a bit demanding to me.
We now have a dedicated discussion board for the Beginners' Portfolio, which you can find here. I'm starting threads for each company in our portfolio, to which I'll add links to news stories as they are released. If you add it to your favorites, you'll get the updates as they come.
Hopefully, it will also prove to be a useful forum for general discussions, which are hard to carry from article to article. In fact, there's a new thread just started yesterday asking some great questions about watchlists. Why not head on over and offer your thoughts before I do?
We also have some other resources that I would recommend to any beginner following this portfolio. It's part of my job to promote our free Motley Fool reports, but I genuinely think we have two in particular that are especially good for beginners. The "What Every New Investor Needs To Know" report is key; it's concise and pretty easygoing, so do click here for a copy.
And you should also get a copy of "10 Steps To Making A Million In The Market." It's motivational and shows that it really is plausible to make a significant pile of cash by investing in shares for the long term. It's available here.
More for beginners: