Derek Pain: An excellent time to be share buying for a long investment

I have recruited two shares to the no pain, no pain portfolio. They are Northern Petroleum, an oil and gas group, and the Spirit Pub Company, the chain that arrived on the stock market following a demerger from the struggling Punch Taverns. With the departure of Clarity Commerce Solutions and Lighthouse, my little share exercise was reduced to a dozen constituents.

The enlisted stocks will temporarily lift the portfolio's strength to 14. But the Capital Pub Co, following the bid from brewer Greene King, is due to leave its ranks quite soon. So to retain my ambition of presiding over a diversified portfolio with a membership of 16 or so, I will have to add a few more stocks in the weeks ahead.

This is, in my view, an excellent time to be share buying. Even if prices fall further long-term investors prepared to go against the tide will be eventual winners.

The decision to add Northern will come as a surprise to regular followers of this column. They will recall that following the disastrous involvement with Nighthawk Energy, I indicated I would steer clear of resource groups. But successful investment requires a little flexibility and the occasional change of mind. My instincts tell me that Northern, even in these troubled times, looks remarkably cheap, hence my about-turn.

The inclusion of Spirit is easier to explain. Its shares, like those of Northern, are on their knees. Yet the group with a collection of managed and leased pubs seems to offer an irresistible opportunity to enjoy food and drink. I would not have contemplated adding the shares if I was not about to call time on Capital. After all one "pure" pub chain at a time is quite enough. Even so, over the years the portfolio has enjoyed riches from its involvement in the drinks industry with Allied Domecq, Burtonwood, Merrydown and Scottish & Newcastle falling to lucrative takeover strikes.

Capital and Spirit are different types of pub chains. Yet there is no reason to believe Spirit, with its long established Chef & Brewer brand, will not fall victim to a strike. Already rival managed pub chain, Mitchells & Butlers, is viewed as a possible predator. It's clear that Spirit, where I am already a shareholder, faces a long, hard slog to realise its full trading potential. An idea how it is progressing should emerge next week when it makes its first trading statement as an independent company. It started life with cash in the bank (£113m), more than 500 leased outlets (no doubt the best from the Punch estate) and some 800 managed pubs. Punch, once the nation's biggest pub chain, is left with about 3,500 outlets. The split is not dissimilar from the favoured banking manoeuvre that has appeared in recent years when the good and the bad elements are consigned to separate existences.

Northern is a traditional oil and gas explorer and producer. A few years ago its shares were around 200p. They are now below 70p. Even before the stock market turmoil the group endured a crash of its own making. The shares slumped to 76p from about 130p following a surprise reduction in its reserves estimate and production figure for its operations in Holland. Yet overall output this year is expected to increase. Besides its Dutch interests the group operates in Italy, Guyane, Spain and this country. There are high hopes its Italian interests, largely in the South Adriatic, will provide some excitement.

Unlike many oil and gas players, the group generates cash, is free of external debt and has money in the bank. I believe its upside potential is considerable. And, like Spirit, trading success is not the sole reason for my interest. After the share decline there seems to be every reason to regard the group as a sitting duck for a takeover strike.

Still bid activity is merely a possibility. I like Northern on trading considerations. The shares are cheap, a factor not entirely due to the stock market's current pessimism. In different ways Spirit and Northern shares reflect specific influences related entirely to the two companies. The portfolio has descended on Spirit at 42p, where the chain is valued at £277m, and acquired Northern at 68.0p, a price that yields a £63.6m capitalisation.

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

PROMOTED VIDEO
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
tech
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
Arts and Entertainment
Bianca Miller and Katie Bulmer-Cooke are scrutinised by Lord Sugar's aide Nick Hewer on The Apprentice final
tvBut Bianca Miller has taken on board his comments over pricing
News
in picturesWounded and mangy husky puppy rescued from dump
News
newsAstonishing moment a kangaroo takes down a drone
Life and Style
Duchess of Cambridge standswith officials outside of the former wartime spy centre in Bletchley Park
tech
News
people
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    SThree: Graduate Recruitment Consultant

    £20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

    Day In a Page

    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
    The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

    The 12 ways of Christmas

    We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
    Birdwatching men have a lot in common with their feathered friends, new study shows

    The male exhibits strange behaviour

    A new study shows that birdwatching men have a lot in common with their feathered friends...
    Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

    Famous diaries: Christmas week in history

    Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
    From noble to narky, the fall of the open letter

    From noble to narky, the fall of the open letter

    The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
    A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

    A Christmas ghost story by Alison Moore

    The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'