OPINION 

Investment as gardening

Nicole Elliott

With the Royal Horticultural Society's Chelsea Flower Show in full swing today it set The Trader thinking whether there were any gardening tips which might help the investing community. Interesting too as there are so many terms used by both the green fingered and those in the financial sphere.

Investments and seed money grow, need nurturing, weeding, pruning occasionally, hedging and better positioning. Metaphors abound, starting with 'reap what you sow', 'don't fight nature' - I mean one could have a field day here.

Let me share a Japanese saying with you. It goes: if you want to have fun for a night, get a bottle of whisky. If you want to have fun for seven years, get a wife. If you want to have fun for the rest of your life, get a garden. Ladies, please substitute as appropriate. The concept rings true with our personal finances. The sooner we get a grip on these, learn how to handle things, put in the hard work and understand how things pan out, it all fits into place. Rewards are not just financial: hours of inquiry and intellectual challenge are, for many, a bonus in themselves. It is also something that one can continue doing until a very ripe old age.

Tulip mania is a powerful lesson to us all, a speculative Dutch bubble which peaked in 1637. Free from Spanish occupation, and rich from the East India Company and trade generally, a wealthy merchant class displayed their success via their gardens where the recently introduced tulip had pride of place. Bulbs changed hands at such phenomenal prices and at such a pace that fractal ownership, futures contracts and options on bulbs were introduced. Until one day, in bubonic plague-ridden Haarlem, no buyers showed up at the daily bulb auction; and the rest is history.

Technical analysis certainly takes some elements from landscape and design. The idea of harmonious combinations, trends that follow specific growth trajectories, patterns which repeat themselves time and time again. That markets have structure and can become sickly, stagnant and weak. Or overblown, irrational and unstable.

 

 

Putting these together we look at four companies' share prices because their focus is plant-based. In alphabetical order Carr's Group's focus is on agriculture, food and engineering. Very impressive price action since 2010 saw a much needed correction in the first three months of this year. Hopefully the share price will now hold above 125-150 pence allowing for a re-test of the record high towards year-end.

 

 

Home Retail owns Argos and Homebase, and the latter has disappointed since 2007, dropping further in 2012, mirroring Britain's lazy attitude to DIY. Share prices then based against 75 pence, are now holding against 150 support, and if we're lucky should rally to 225/250 later this year.

 

 

Kingfisher, which owns B&Q, has done much better up fourfold since 2009. Technically any dip ought to hold above the 300 area this year allowing for a rally to 450-485 next year.

 

 

Finally Wynnstay Group which supplies farmers with a wide range of agricultural products and also runs country stores. Share price action is typical of that smaller firms where volume is a fraction of its bigger peers. Quite spectacular since 2009, seeing a healthy correction since 2014, it has retraced a Fibonacci 61 per cent of previous gains. Expect the retreat to start levelling off now, steeling itself for a re-test of the record high early next year.

  

MORE FROM NICOLE ELLIOTT...

Nicole Elliott is a long standing Member of the Society of Technical Analysts and has just taken over the IC's trading coverage. She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.

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