What You Were Buying Last Week: National Grid
LONDON -- One of Warren Buffett's famous investing sayings is "be fearful when others are greedy and greedy only when others are fearful" -- or, in other words, sell when others are buying and buy when they're selling.
But we might expect Foolish investors to know that, and looking at what Fools have been buying recently might well provide us with some ideas for good investments.
So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been buying in the past week or so, and what might have made them decide to do so.
A substantial yield
After climbing steadily for most of 2013 -- it had put on 18% up to the middle of May -- the share price of National Grid took a tumble at the start of last week, falling around 6% in the course of the week. That weakness may be what prompted some investors to buy, putting the company in the number 1 spot in the latest "Top 10 Buys" list*.
And they were in good company: at the end of last week National Grid's Chairman, Sir Peter Gershon, bought 18,800 shares at 798 pence each -- a 7% premium on their current price, as they've weakened a further 6% since -- increasing his total holding to 60,286. It's always reassuring when directors buy shares in the company, especially when they spend £150,000 doing so.
National Grid's latest annual results, published on May 16, certainly made for encouraging reading. Operating profit was up 6% and pre-tax profit had increased 14%, on revenues that had risen 4%. Basic earnings per share had grown 13%, and the full-year dividend was increased by 4%. The board also reiterated its new dividend policy, now in effect, whereby the ordinary dividend will be increased at least in line with the rate of RPI inflation "for the foreseeable future".
National Grid runs the gas and electricity delivery networks across the entire U.K. -- pylons and pipes -- and provides power directly to millions of customers in the North Eastern states of the U.S. Whilst some people regard having to operate in a highly regulated market as constraining National Grid's potential, others see the nature of their business as giving the company an essentially assured revenue stream and providing an impregnable "moat" that shields them from competition -- no-one else is going to implement a nationwide gas and electricity infrastructure, after all. Defensive shares like National Grid can
A major attraction of National Grid is, of course, its dividend, with its shares currently yielding a substantial 5.5%. So long as the company can keep delivering on its dividend policy, National Grid should remain a very attractive proposition for income-seeking investors.
Top-quality share selections
National Grid is one of the companies featured in a new Motley Fool repor, "5 Shares To Retire On", along with four other quality companies for the long-term -- companies that have an outstanding record of providing reliable shareholder returns.
If you want to know which other top-quality share selections our team of expert analysts here at the Motley Fool believe could form the basis of a long-term income-oriented portfolio, you should get hold of your FREE copy now.
* based on aggregate data from The Motley Fool ShareDealing Service.
The article What You Were Buying Last Week: National Grid originally appeared on Fool.com.Jon Wallis has no position in any stocks mentioned. The Motley Fool recommends National Grid plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.