Buying shares - a question

[AJI]

This is a company that one of my friends currently works for....looking at the link below and maybe other companies in a similar place in terms of share price, would the idea of buying a few shares be a good one?

http://www.telegraph.co.uk/finance/newsbysector/su...


ie. current share price is 1p, say for example I bought 1000 shares for £10 and the share price goes back towards its normal price of around 55p, this being the value they were at last year, then a quick profit could be on the cards? Or is it not that easy?
(I'm guessing the latter - otherwise everyone would be doing it).

[Puggit]

Don't forget the cost of facilitating your purchase and selling of shares, and CGT.

[johnfm]

What makes you think the company will return to 55p/share?

[Murph7355]

Even at 1p a share still has room to fall.

There's a reason it fell. Unless there's one for it to go up again it could be 10 quid down the drain (plus dealing fees. Assuming you can buy in blocks of that size etc).

[AJI]

johnfm said:

What makes you think the company will return to 55p/share?

Yep, I guess this is the gamble.
But having a bit of knowledge on this company it looks like the forward order books are strong and the only thing holding the share price down is the company debt.
(And possibly the ludicrous salary/bonus prices being handed out to the few at the top)

[AJI]

Murph7355 said:

Even at 1p a share still has room to fall.

There's a reason it fell. Unless there's one for it to go up again it could be 10 quid down the drain (plus dealing fees. Assuming you can buy in blocks of that size etc).

I'm not really a gambling man, but I thought a £10 maybe stretch to £20 bet would not be the end of the world

I just hear of people mentioning that they did good on a some shares by buying cheap etc.....I just thought this could be one of those type of opportunities.

[AJI]

Puggit said:

Don't forget the cost of facilitating your purchase and selling of shares, and CGT.

Having not done shares before are these extra costs significant?

The only one of the above I am aware of is the CGT. How much would the other two generally cost?

[Murph7355]

AJI said:

I'm not really a gambling man, but I thought a £10 maybe stretch to £20 bet would not be the end of the world

I just hear of people mentioning that they did good on a some shares by buying cheap etc.....I just thought this could be one of those type of opportunities.

There are many penny shares out there.

Buying "cheap" is all relative to the value in the product. Paying 1p for these may or may not constitute good sense (probably not as they seem to be trading a few percent below that ).

You might have more chance of seeing your money back buying ten quid's worth of lottery tickets. Or maybe one day Mouchel will hit the heady heights once more...

[condor]

AJI said:

Yep, I guess this is the gamble.
But having a bit of knowledge on this company it looks like the forward order books are strong and the only thing holding the share price down is the company debt.
(And possibly the ludicrous salary/bonus prices being handed out to the few at the top)

Company debt and your mention of high salary/bonus payments to those at the top would suggest it's about to go bust/ into 'administration'. Asset strippers aren't renowned for having the best interests of the company at heart - more interested in lining their own pockets before it all falls down.

[johnfm]

Reading the article, it looks like a restructuring package is on the verge of agreement.