Derek Pain: An excellent time to be share buying for a long investment
Saturday 27 August 2011
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
Money alert: Cutting the cost of motor cover
Problem gambling: Amid heavy advertising and a surge in remote sports betting, more and more 16 to 24-year-olds are now seen as 'at risk'
Interest-free credit helps local people battle loan sharks
How to start your own internet business
Be warned of the dirty tricks the bailiffs pull
- 1 What if 35 Palestinians had died, and 800 Israelis?
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 The secret report that helps Israel hide facts
- 4 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 5 Israel's propaganda machine is finally starting to misfire
The secret report that helps Israel hide facts
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
A day in the life of Vladimir Putin: The dictator in his labyrinth
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...
£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...
£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...
£400 per day + competitive: Orgtel: Liquidity Reporting - Basel III - LCR - Ba...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000