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LONDON -- Last week, I spoke of occasionally turning our back on the big Foolish cornerstone of long-term buy and hold, and suggested there is nothing wrong with going for an occasional shorter-term investment if you think you see a good opportunity. That generated some discussion, with suggestions that it's a dangerous thing to say to beginners.
It can be dangerous, and I do support the strategy of finding great long-term investments and holding them for decades. But I don't think we need to be puritanical about it. And I'm not going to be hypocritical, either. I don't know a single experienced investor who has never tried a short-term punt, and I'm not going to try telling beginners they can't have a bit of a gamble when I have done, and occasionally do, exactly that myself.
New watchlist additions
Anyway, I've come up with two more companies that I think are worth watching. At this stage, I'm not going to be too critical in my selections, but I'm going to build the watchlist the way I did my very first one in real life -- by adding companies that look interesting even if I might not keep them for long, and then when the list starts to get a bit too cumbersome, compare the entries more critically and prune it. It's the way I'd recommend a beginner go about it.
I'm quite keen on engineering, and I'm looking at engineering and design consultancy WS Atkins
Current forecasts put the 702 pence shares on a forward price-to-earnings ratio of 9 with an expected dividend yield of 4.6%. There's net cash on the books, and the dividend keeps being steadily raised. Sound cheap? It does to me, so it goes onto the watchlist.
Time for travel?
The other company I'm going to add to the watchlist is TUI Travel
But TUI is one of the strong players that should head into the recovery well, and there was a pre-close update today ahead of full-year results -- I'll take a look at that in our next portfolio update. What we have is a forecast dividend of 5.1% from a share on a P/E of 10, and no debt.
So this is what our watch list looks like now:
|
Company |
Market cap |
Price |
Forward P/E |
Forward dividend |
|---|---|---|---|---|
| WS Atkins | 700 million pounds | 702 pence | 9 | 4.6% |
| BAE Systems | 10.7 billion pounds | 321 pence | 8.1 | 5.7% |
| Ricardo | 199 million pounds | 382 pence | 13 | 3.3% |
| TUI Travel | 2.6 billion pounds | 231 pence | 10 | 5.1% |
| Unilever | 29.4 billion pounds | 2,273 pence | 16.5 | 3.6% |
| United Utilities | 4.9 billion pounds | 723 pence | 18 | 4.7% |
Another lesson
This week, I was intrigued by the woes hitting the share prices of fashionists Burberry
No, to me it really means don't buy what you don't understand -- and after years of watching the likes of ASOS booming and busting, I've learned that I very definitely have no idea how the fashion business works. So these two are out for me.
Next time
I'm hoping to make a new purchase decision next week, so stay tuned.
In the meantime, a big part of the Beginners' Portfolio is based on a strategy of buying strong dividend-paying shares, and Neil Woodford is an acknowledged expert on that subject. The free Motley Fool report "8 Shares Held by Britain's Super Investor" takes a look at some of his major winners. Click here to get your free copy, while it's still available.
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