Beginners' Portfolio: Let’s Buy A Growth Share!

Published in Investing on 18 July 2012

The fifth addition to our beginners’ portfolio heads in a different direction.

This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.

For our Motley Fool Beginners' Portfolio, we've so far stuck mainly to blue-chip, dividend-paying, FTSE 100 (UKX) shares, which is essentially the investment policy followed by Neil Woodford, investment head at Invesco Perpetual, and widely considered among the world's top investors. If you want to base your portfolio on his strategy, the free Motley Fool report "8 Shares Held By Britain's Super Investor" is what you want -- click here to get a copy.

We have also brought the FTSE-250 housebuilder Persimmon (LSE: PSN) into the fold, for reasons I explained last time -- as it's essentially an educational portfolio, we're not sticking to one rigid strategy, but will include shares that I think are bargains for different reasons.

I do think Persimmon is still a safe long-term purchase, but today we're branching out into something very different.

A new type of share

I've said all along I want to add one or two small-cap companies with growth potential, which partly reflects my earlier liking for Jim Slater's approach. And today I've gone for one that I've been looking at with great interest of late -- I've added shares in video technology expert Blinkx (LSE: BLNX) to the portfolio.

Here's what the deal looked like...

Blinx trade

Our £500, invested using TMF ShareDealing, got us 1,319 shares at a price of 36.94p for a total consideration of £487.24. Add on the £10 commission and £2.44 stamp duty, and we get a total of £499.68 spent.

The total portfolio is now looking like this...

CompanyBuy priceShare costChargesTotal cost
Vodafone (LSE: VOD)168.5p£487.07£12.44£499.51
Tesco (LSE: TSCO)305.5p£485.80£12.43£498.23
GlaxoSmithKline (LSE: GSK)1,440.5p£489.77£12.45£502.22
Total £2,437.99£62.2£2,500.19

Why Blinkx?

One of the things I like about Blinkx is that it is pretty much impossible at the moment to put any meaningful fundamental valuation on the company. Wait, what, I think that's good?

Yes, because at this stage in a growth company's life, before people are able to quantify things, it can mean opportunities for the brave. So let's get in on this potential high flyer and take a punt on the technology, I thought.

And that technology does impress me. Targeted advertising is a really big game these days (and it's often woefully done -- eBay, for some reason, keeps trying to sell me parts for a Myford ML7 lathe).

Targeted means searching

Good targeting depends on the ability to be able to search and analyse the content that people are looking at, and Blinkx's video search tools, backed by Autonomy technology with an in-perpetuity licence, stands a good chance of becoming a major leader in the field.

The share price fall, from a peak of 158p last year, was partly based on fears after Autonomy was taken over by Hewlett-Packard (NYSE: HPQ.US). But I reckon it's overdone, and we have a nice buying opportunity now.

If you want some beginners' help on how to make it big, the Motley Fool's free report "10 Steps To Making A Million In The Market" should accompany this Beginners' series pretty well. It's still free, so click here to get your personal copy.

And please feel free to let me know what you think of this latest purchase.

More for beginners:

> Alan does not own any shares mentioned in this article.

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The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

theredflag 18 Jul 2012 , 5:31pm

"One of the things I like about Blinkx is that it is pretty much impossible at the moment to put any meaningful fundamental valuation on the company"

Hold on a minute, didn't you just value the company? (36.94p x number of shares in issue)

liesarenocomfort 18 Jul 2012 , 6:22pm

I used to work with the Myford ML7 lathe, but it didn't turn out.

TMFBoing 18 Jul 2012 , 8:18pm

Hold on a minute, didn't you just value the company? (36.94p x number of shares in issue)

That's the current price - I'm hoping the long term value will be quite a bit more than that.

Foolish best,

Excel35 18 Jul 2012 , 9:41pm

Alan, how do you feel about having to start your article referring to the one and only super sonic Uk investor Woodford?

Very tedious now seeing the link pushed from the first paragraphs.

82mark 18 Jul 2012 , 11:30pm

I agree with excel35. The number of adverts for free reports that I gratefully read weeks ago is not encouraging me to buy anything. See your own articles on the problems monetising facebook.

Novice3049 19 Jul 2012 , 10:58am

I third that.

Persistent links to the same Woodford & Buffett reports, along with those stupid, irrelevant mouse-over popups on the page it's a lot less enjoyable than it used to be to visit the site.

ChancieGardener 19 Jul 2012 , 11:14am

Bored as I am with the constant NW/WB is interesting to note that on FarceBook...WB has 300,000+ "likes" NW has 10!

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