Stocks that perform well in a property market downturn

Stocks that perform well in a property market downturn

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Discussion

CIS121

Original Poster:

1,265 posts

214 months

Sunday 7th October 2007
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Mainly a hypethetical question to those financial bods in the City:

There are well established beliefs on what defensive stocks to hold in a general economy downturn. Are there similar ideas on stocks for a property market downturn. i.e. if the property market was to come down over the next year, are there industries that would benefit (hence the price of their shares would go up)?

JD247

47 posts

200 months

Sunday 7th October 2007
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If only it were that simple, we might all be millionares.

Defensive stocks are usually those which do not have any cyclical demand constraints plus good dividend yields, but their performance is far from certain. Often companies like energy suppliers are included in this group, but things are far more complicated than just saying; this stock will perform in the event of a downturn in a certain market.

JD

che6mw

2,560 posts

226 months

Monday 8th October 2007
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tinned goods and ammo?

Tony 1234

3,465 posts

228 months

Monday 8th October 2007
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CIS121 said:
Mainly a hypethetical question to those financial bods in the City:

There are well established beliefs on what defensive stocks to hold in a general economy downturn. Are there similar ideas on stocks for a property market downturn. i.e. if the property market was to come down over the next year, are there industries that would benefit (hence the price of their shares would go up)?
When you find out the answer for god's sake let me know!

regards

Horse_Apple

3,795 posts

243 months

Monday 8th October 2007
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Short selling gives the best quick hit.

When property dips you can also look at the acilliary stocks like carpet, DIY, furniture and banking stocks to short. It's the more unusual ones that can get missed by the funds and give an opportunity.

I would prefer to be short during a property downturn than long as it is a more natural hedge to most peoples' primary asset which is the family home.

CIS121

Original Poster:

1,265 posts

214 months

Monday 8th October 2007
quotequote all
Horse_Apple said:
Short selling gives the best quick hit.

When property dips you can also look at the acilliary stocks like carpet, DIY, furniture and banking stocks to short. It's the more unusual ones that can get missed by the funds and give an opportunity.

I would prefer to be short during a property downturn than long as it is a more natural hedge to most peoples' primary asset which is the family home.
I'm not terribly knowledgeable on this, but I thought when you short you need to buy the shares fairly soon to fulfill your sale? Like a month or so?

JD247

47 posts

200 months

Monday 8th October 2007
quotequote all
Selling short means you are 'betting' on the price falling. Often this is done via a CFD (contract for difference) or a spread trade, there are differences, but not that substantial.

See the IG index thread for a bit more detail. Hope you have a few hours spare to do so!

It is not for the faint hearted!

Have done a fair bit of spread trading myself and overall made money, but it is SO easy to lose, witness me losing about £300 in less than 2 minutes trading on an index which I got spectacularly wrong! Oops!

Fittster

20,120 posts

214 months

Tuesday 9th October 2007
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che6mw said:
tinned goods and ammo?
Tinned goods, ammo and gold. Ready for anything then.

g4ry13

17,038 posts

256 months

Tuesday 9th October 2007
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JD247 said:
Have done a fair bit of spread trading myself and overall made money, but it is SO easy to lose, witness me losing about £300 in less than 2 minutes trading on an index which I got spectacularly wrong! Oops!
How did you manage that? Were you betting on some figures/interest rates or highly leveraged at the time? Or just an accident?

I was once doing a bit of scalping and was waiting for a price to come up and had my finger on the mouse and then clicked it by accident. It started going against me pretty quickly and I got out but for a smaller price than you.

JD247

47 posts

200 months

Tuesday 9th October 2007
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g4ry13 said:
JD247 said:
Have done a fair bit of spread trading myself and overall made money, but it is SO easy to lose, witness me losing about £300 in less than 2 minutes trading on an index which I got spectacularly wrong! Oops!
How did you manage that? Were you betting on some figures/interest rates or highly leveraged at the time? Or just an accident?

I was once doing a bit of scalping and was waiting for a price to come up and had my finger on the mouse and then clicked it by accident. It started going against me pretty quickly and I got out but for a smaller price than you.
I took quite a big punt (high leverage yes) on the FTSE100 going in a certain direction just after the US market opened, was over confident (Having made a tidy profit on an AMVESCAP long trade) and didn't make an entirely objective decision, sat there and watched as it proceeded rather quickly to my stop loss!

Worse than that was bottling a long trade on the FTSE250 in around May 2003, had finger hovering to click on a trade @ £20 a point. BIG mistake!

Fittster

20,120 posts

214 months

Tuesday 9th October 2007
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Moneyweek are suggesting pawn brokers

article

Horse_Apple

3,795 posts

243 months

Wednesday 10th October 2007
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CIS121 said:
Horse_Apple said:
Short selling gives the best quick hit.

When property dips you can also look at the acilliary stocks like carpet, DIY, furniture and banking stocks to short. It's the more unusual ones that can get missed by the funds and give an opportunity.

I would prefer to be short during a property downturn than long as it is a more natural hedge to most peoples' primary asset which is the family home.
I'm not terribly knowledgeable on this, but I thought when you short you need to buy the shares fairly soon to fulfill your sale? Like a month or so?
The time element really depends on the stock lending facility. When you short, you have to borrow the stock to deliver to the market by the settlment date. You can then hold the short for as long as the stock lender is happy to lend you the stock.

With liquid stocks this is usually for ever, but if you want to trade complete rubbish then you can either end up paying very high borrow or getting called in at short notice and forced to buy back (close) the position to deliver (return) the borrowed stock.

Putting it very, very simply a spread bet or a CFD does this all for you with no hassle.

In my view, people who want to bet should stick to bookies and while a spread bet may be refered to as a bet it is up to you how you use it. It certainly isn't a bet if you are hedging exposure you have elsewhere.

Either way it's not the sort of thing to run blindly into.

The most obvious way to do it is to look for a defensive fund and invest in that and let them buy the right investments and short the right ones.


Speeder

424 posts

225 months

Thursday 11th October 2007
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Chemring is one stock that has always had a near perfect negative correlation to UK house prices.

Not sure why. But it has.

I've just seen the tinned food & ammo comment above....LOL, well yes in a way that's right....given Chemring makes military armaments.

Edited by Speeder on Thursday 11th October 10:21

Plotloss

67,280 posts

271 months

Thursday 11th October 2007
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Fair Isaac

They make a distressed debt recovery product, sales are always up in a tightening market...