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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

The PIN Fund – One Bad Apple Did Not Spoil The Lot

Peter Hemple takes a slightly early look at how our fictional fund performed in Q3 2017

We have been running our fictional property fund for three years now, since the end of Q3 2014. Thankfully, in the very first article three years ago, I highlighted the importance of including a stop-loss order stating: ‘you simply put in a stop-loss at 30% below the share price you buy at.’

Unfortunately, this stop-loss has now been triggered for a third time in three years (the first two were for estate agents Savills and Foxtons) as shares in Carillion collapsed in July. One of the government’s biggest contractors and an employer of 50,000 people worldwide, Carillion’s fall in its share price wiped nearly 75% off the company’s value in just three days. A damaging profit warning, revelations of a sharp increase in debt and larger than expected write-downs on four projects confirmed what many short sellers in the market had bet on for several years - that Carillion’s finances were far shakier than initially appeared.

The company was only installed into the PIN Fund at the start of this year at a price of 236 and had already fallen to 186.8 by the end of Q2. The stop-loss was activated at 30% below purchase price at 165. However, dividends earned in the first half of this year of 12.7p (5.4%), means that the total loss was reduced to 24.6%.

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