Hopefully this will be short and sweet. You may have seen on my ‘News’ bit on the Homepage or on Twitter that I sliced off a chunk of my CRST holding at around 440p early this morning. As usual, I made the decision in the ‘cold light of day’ (ok, it was dark) last night after the markets were well and truly shut, and it was partly driven by Chart based timing as I will outline below.
I have held CRST for about 2 years having bought my first chunk just after the IPO - because it looked flippin’ cheap. I have quite a lot of Shares and Spreadbet positions and I chopped off about a fifth of my holding - banking a Profit of over 62% and there were Divvys on top of this as well - not too bad. Hopefully I can shift some more of the Holding with similar banked profits or preferably better !!
- If you have seen my Index Updates and read some of my Tweets, you will know I am a bit nervous on the Markets in general at the moment. I may be wrong, but I feel that it is too easy to make money on the Long tack at the moment and complacency seems to be off the scale - I am seeing hardly anyone else talking about Markets being Toppy and all I hear is “New All Time Highs on ABC” and “FTSE100 hit Highest Ever !!” etc. This doesn’t feel right to me, I suspect a chunky drop is due soon. This is not utterly fantastic - Markets have a marked Seasonal bias with good gains in the Winter months followed by poor returns in Spring and Summer especially - I see no reason why this year should be any different and the impending General Election will surely slow any upwards progress. Technically Markets in Europe and the FTSE100 are looking pretty overbought, although US might have more room short term to move up. In general I want to lighten up all my Exposure for the Summer and selling some CRST is part of this process.
- With regard to Housebuilders in particular, there is a noticeable (and fairly widely known) trend that their shares tend to perform well in the first quarter of the Year - Q1. I have looked back at some Housebuilder charts for several years and many show this tendency. I got caught on this last year - CRST did really well in Q1and I was sat on nice Paper Profits but then we got to March / April and it dropped heavily - so the Paper Profits were wiped out. I don’t want a repeat - the money was dead for 9 months in effect, although I did pick up a decent divvy. I suspect this Q1 effect is becoming Investor Folklore - so many people know about it that as we get into Spring, lots of people may sell out.
- For all of my Investing Life, Housebuilders have been on unusually Low P/E Ratings - often around 8 historic or LESS. This is because they are incredibly cyclical - once the UK Economy hits the buffers, the drop in Sales kills them very fast. Just think back to the Credit Crunch and all those Housebuilder Rights Issues. On this basis, CRST on a Historic P/E of 11.4 at the 440p I sold at, might not sound Expensive but for a Housebuilder perhaps it is? Who can tell? Anyway, it has done well and it seems shrewd to slice a bit off and bank some gains.
- It is impossible to predict the future. We all think we can, but we can’t. Sorry, but that is the reality. All our future gazing and analysis is really a load of bollox - anything can happen tomorrow and throw our Projections and Predictions right out the window. With this in mind, when I made my decision to Sell a chunk last night, the facts were that I had a Good Stock in a Good Company, but it had run up a lot and I had a nice Profit which needed Locking In. I will most likely continue to Slice in coming weeks as things develop - with the aim of being totally out of CRST by the end of March if I can. A Profit is not a Profit until you Bank it.
- The General Election could pose big problems for Housebuilders. If we get the current Conservative Government re-elected, then things will most likely be OK for them, but this is quite unlikely in my view and a Coalition based around Labour is much more probable - this would most likely establish a very difficult environment for Housebuilders with all sorts of silliness from well-intended meddling. I do not want to expose myself too much to such a Risk.
As usual, I will bung in a few charts and explain what was going on when I looked at these Last Night - note they are from then, they have not been updated with today’s Price Action. I have been thinking about selling CRST for some time, and I have been waiting for Technical Signals that the time is right to start chopping away at it.
If you look at the Chart below, you will see a pretty good Uptrend - no problem here and it could well go higher - but that is fine with me, I still have 4/5 of the Holding I had yesterday. That’s the beauty of Topslicing, you are still in the game but if it drops, then you at least banked some Profits. I am a firm believer in ‘Scaling In, and Scaling Out’. The only thing to notice here is that there was a Previous Peak a few days earlier - this could form some sort of Resistance and limit immediate Upside. Oh, and it is worth remembering that even the most beautiful Uptrend will end at some point - so it can look great one day, and rubbish the next !!
The Trend is your Friend…….until it is not……….
OK, that should do it. Hope this helps, wd