Read on to see an article from the archive of Clem's Building an Income Portfolio blog:
Drax Was a Good Buy
Drax is popping. It’s up 10% today as it announced its interims as being ahead. The loss of subsidies is going to cut its profits in half but that should have its price at around 400p, about 50% higher than its current price.
It has increased its interim dividend but is liable to drop back as its profits from terminated government subsidies ceases.
We’d probably sell at 350p or at least get itchy.
Meanwhile the market has been falling hard. It has bounced today but can’t really afford to fall further unless we are going into a serious slump. It could happen but recently every time it hits that kind of level the market levitates as if by magic. Let’s see if the plunge team are on holiday.
I took a look at Direct Line today as it is showing a 37% profit. When should we sell? On the face of it this share could go a lot higher, so we should run these profits.
The market has had a heavy fall since May from 7,103 to 6,554 as I write. That’s a fall of 8%. The income portfolio is closely link to the FTSE 100 so we have likewise been thumped. This is a level seen back at the beginning of 2013, so we can scrub over 2 years of investing.
You can’t time the market, sadly, so off we go building up our portfolios for more bullish times. (Meanwhile when we started this journey the FTSE was 4% higher.)