You will know young captive birds kept in a confined space peck the less fit chicks in their bums. Why? I don’t know but I guess there is an innate instinct to bully and the blood is tasty?
I thought I’d cured myself of this expensive habit after bottom picking shares in Marks and Spencer last year. I paid £2 and today they are £1. However, I am a recidivist. Rolls- Royces’ are famed for their comfy ride. Of course the brand belongs to BMW now and Rolls-Royce is an engineering company listed in the FTSE 100 but the shareholders have not been gliding smoothly through the turmoil created by Covid. They may well feel as if they are careering down the Cresta Run.
No matter how well managed a company is there can be unexpected headwinds; and RR today scores high in competent management. The current Board inherited a legacy of problems including corruption and faulty aeroplane engines. These were tackled robustly and the shares looked a safe bet at more than £8 in 2017. Today their order book is emptier than would be optimal and there are issues with airlines that have ordered and want to cancel or have already bought and now cannot keep up the payments.
As if that isn’t enough “long term” (ha,ha) shareholders are selling out. RR aren’t paying a dividend this year; income funds don’t like this. RR is now valued at about £3 billion and I expect it to drop out of the FTSE 100. I am not alone and tracker funds are dumping the shares too.
This morning I bought some RR shares (£1.58) like a greedy bottom picker. In this instance I’m not investing for the long term but I’m buying British, I’m buying Boxworth (insider joke), I’m buying world-class engineering and if the shares fall much further I’ll take out a mortgage and buy the company.