Derek Pain: A month of woes has slashed thousands off my profits

No Pain, No Gain

To paraphrase a former prime minister, a month is a long time in the stock market. When I reviewed the 12-year performance of the no pain, no gain portfolio last month, a gain of £105,000 was recorded. Since then the price of oil has soared, more eurozone worries emerged and doubts about the strength of Britain's economic recovery have increased. The Japanese tragedy is creating additional pressure.

It is not surprising that such a catalogue of woe has extracted a toll on shares, and the stock market has lost its February exuberance. The blue-chip Footsie share index has suffered reverses, and is looking increasingly vulnerable. A period of uncomfortable weakness could stretch ahead. But buy and hold investors should put their heads down and wait for the agony to disappear.

The brave could even venture forth. After all, investors who have taken advantage of share setbacks in the past should have achieved handsome rewards. Only two years ago the Footsie was struggling around the 3,500 points mark and the City was shrouded in deep gloom. Since then progress has been quite scintillating. For example, the portfolio constituent Whitbread was bumping along at around 700p. Since then the shares have almost touched £20, but fallen back in the general unease and, admittedly, a disappointing trading statement.

Small investors should always adopt a safety-first approach. It is no good borrowing money and getting into difficulties. Stick to using spare cash you can afford to surrender.

I would also counter against short-termism. Leave that to those who think they know their way around the stock market. I have encountered many that felt they could play the system and make a quick and easy fortune. Some have succeeded, particularly in the short term. But an uncomfortably large number have come a cropper when shares unexpectedly moved against them.

I suppose the portfolio's quarterly performance helps to illustrate the unpredictability and volatility of the stock market. At one time it was recording a near £150,000 gain. Subsequently profits – fortunately it has never suffered losses – were reduced to £70,000 or so. Now £105,000 has been cut to not much above £100,000 in just a few weeks. Dealing costs and dividend income are ignored in my calculations.

The portfolio seems to have more loss-making constituents this time. Shares of Patsystems, a specialist in electronic trading systems, are suffering from reduced profits, but a stronger display is expected this year. Clarity Commerce Solutions, providing software for the leisure and retail industries, is a casualty of worries that some customers may be reluctant to buy its products in the cost-cutting climate. The accountancy group Lighthouse is a long-term underperformer. The shares seem to be undervalued, but their continuing weakness is worrying. SnackTime, too, has had a disappointing run, probably because it has to digest an acquisition that doubled its size.

My most recent recruits have done quite well. Avation, raising £10m via a share placing, touched 119p, and is now 111.5p; Capital Pub Co is 131.25p after stretching to 146p; and Rivington Street Holdings reached 44.5p but has since relapsed to 36.5p.

I am still hoping to add one or two to the portfolio. My belief is that 16 constituents represents a sufficiently widely spread holding. However I am not wedded to 16, and realise that many small shareholders could find such a collection too difficult to manage, as well as a far too expensive excursion.

Among the shares I have under scrutiny is Wm Morrison, the supermarket chain. It is clearly enjoying considerable momentum with its core food and drink sales, but seems to be rather late increasing its range of non-food items and engaging in online trading. Such developments will be expensive.

Lamprell, an oil back-up group, is also in contention. Its year's figures are due towards the end of this month, and it seems wise to await them.

But I am not confining my search to these contrasting groups. I am still wondering about Animalcare, a much smaller operation supplying products to vets. It recently produced healthy-looking profits, and seems set to make further progress.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Tim Sherwood raises his hand after the 1-0 victory over Stoke
footballFormer Tottenham boss leads list of candidates to replace Neil Warnock
Arts and Entertainment
L to R: Hawkeye (Jeremy Renner), Captain America (Chris Evans) & Black Widow (Scarlett Johansson) in Avengers Assemble
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
Adnan Januzaj and Gareth Bale
footballManchester United set to loan out Januzaj to make room for Bale - if a move for the Welshman firms up
Suite dreams: the JW Marriott in Venice
travelChic new hotels in 2015
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Selby Jennings: Quantitative Research | Equity | New York

    Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

    Selby Jennings: SVP Model Validation

    Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    Day In a Page

    Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

    Aren’t you glad you didn’t say that?

    The worst wince-and-look-away quotes of the year
    Hollande's vanity project is on a high-speed track to the middle of nowhere

    Vanity project on a high-speed track to nowhere

    France’s TGV network has become mired in controversy
    Sports Quiz of the Year

    Sports Quiz of the Year

    So, how closely were you paying attention during 2014?
    Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

    Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

    From Armstrong and Miller to Pointless
    Sanchez helps Gunners hold on after Giroud's moment of madness

    Sanchez helps Gunners hold on

    Olivier Giroud's moment of madness nearly costs them
    A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

    Christmas without hope

    Gaza fears grow that conflict with Israel will soon reignite
    After 150 years, you can finally visit the grisliest museum in the country

    The 'Black Museum'

    After 150 years, you can finally visit Britain's grisliest museum
    No ho-ho-hos with Nick Frost's badass Santa

    No ho-ho-hos with Nick Frost's badass Santa

    Doctor Who Christmas Special TV review
    Chilly Christmas: Swimmers take festive dip for charity

    Chilly Christmas

    Swimmers dive into freezing British waters for charity
    Veterans' hostel 'overwhelmed by kindness' for festive dinner

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect