Monday, October 02, 2006

Every little bit helps

An interesting bit of news came in the mail for me the other day.

Back in 2003, I came upon a little sum of money when my grandfather died and left me a few thousand British pounds in his will. I splurged on a new laptop for myself (still got it) and vowed to use the rest to get my feet wet in this thing called the stock market I was hearing so much about.

I was vaguely familiar with the concept of diversification, so I resolved to put the cash, about $3000 total, into shares of two companies I'd heard of: Biovail (lots of old people means lots of demand for drugs, I reasoned) and Nortel (if they were going to go belly-up they'd have done it by now, my thoughts went).

Biovail and Nortel.

Don't be alarmed by the blood-curdling scream you just heard. That was just my reaction when I clawed my eyes out at the sight of those two words placed next to each other in my portfolio. Because those two companies have truly given Canadian investors some serious nightmares in the past few years, and I owned both of them at one point.

Biovail's still stinking up my portfolio to this day, but Nortel I gleefully rid myself of only a few months after I bought them. Strangely enough, I actually managed to turn a quick profit on Nortel -- the shares inexplicably doubled from about $5.50 when I bought them to more than $11 when I sold -- which makes the fact that apparently I'm entitled to part of a looming settlement in a class-action suit against Nortel even more humorous.

My on-line broker sent me the above-linked letter, detailing what I needed to do to get my share of the $300,000,000 Nortel has earmarked to pay for their role in misleading investors about their earnings in 2003 and 2004.

So how much can I expect? Crunching the numbers, because of the small amount of stock I bought (only 100 shares) I can expect something in the neighbourhood of a cheque for about $11, and 11 shares of Nortel, currently trading at about $2.50. All in all, it'll be something like a $30 to $40 bump for my portfolio -- not much more than the brokerage fees I'd accrue if I wanted to sell the shares. That's a bit of a downer. With a potential return like that, looks like I'll be hanging on to those Nortel shares once more to see if the firm can reclaim even a shadow of its former glory. At least I didn't have to pay for the damn things this time.

Still, I'm going to send in the forms to participate, and consider myself lucky for the opportunity. Because $600 in capital gains I no doubt pissed away at the local publican house back in the day, plus $40 and the potential for more in a class-action settlement is a damn sight more than most Canadian investors ever got out of the one-time tech darling.

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