Derek Pain: I'll stick with this terrible twosome – for now at least

No Pain, No Gain
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The Independent Online

The no pain, no gain portfolio made modest progress during the past three months. Although the stock market enjoyed a relatively good quarter – making a nonsense of the tired old saying that investors should sell in May – my little collection of shares turned in a rather disappointing display.

True, the total gained advanced more than £2,000 from the last review to around £93,500, but I had expected a rather more compelling result. Still, I suppose I should be grateful for small mercies, even though profits have fallen by around £10,000 this year.

A few disastrous investments have wreaked havoc with the portfolio's recent history. Two of them remain, others have been ditched.

The two worst-performing current constituents are SnackTime, the vending machine operator that expanded too quickly, and TEG, a composting technology group that was forced into an emergency cash call. I have decided to stick with them in the hope they will come good. But any more slips could quickly end their costly participation.

Animalcare is also giving some concern. Although the veterinary products group blotted its copybook with a profits warning, I nurse hopes that, in spite of the squeeze on family budgets, the difficulties will be short lived.

Other stocks in the portfolio are profitable – or marginally out of the money. Even G4S, the security giant that endured an unbelievable Olympic fiasco is, surprisingly, just about showing a gain. Quite frankly I was preparing to dump the shares. But the stock seems to have Indian rubber qualities. When G4S stumbled over its abandoned acquisition of ISS last year the shares slumped to 220p. before recovering to top 290p. The embarrassing Olympic failure sent them down to 240p; they have since exceeded 270p.

The G4S performance has been quite remarkable. Many of us expected a much more dismal display after the odium heaped on the company following the Olympic security fall out. I am writing before the security giant's interim figures this week; they could, of course, have quite a dramatic impact on the share price.

Even so, the negligible G4S advance from my 264p buying price is one of the many influences that have eroded the portfolio's profits. Before the banking meltdown profits were nudging £150,000. Since then they have often topped £100,000. But the last two quarters have been particularly painful. Of course, dividend income, which would be quite substantial, is excluded from my calculations. So are dealing costs.

Avation, the aircraft-leasing group recruited at the same time as the highly profitable Capital Pub Co. which fell to a takeover bid, has been a shade disappointing. With talk that the Australian resources boom is coming to an end, the shares have dropped from around 120p. The group, through its links with the "down under" airline Skywest, could be a casualty of any slowdown in the mining surge that has so benefited the Australian economy. Skywest could already be feeling the strain. Its shares are down to 18p from a year's high of 28p. Clearly I need to keep an eye on Avation which has said it intends to obtain a Singapore share quote to run in tandem with its full London listing.

Booker, the cash and carry chain, remains the star performer. Whitbread, the leisure group, and Hargreaves Services, are also showing handsome returns. However, coal mining to transport group Hargreaves remains perilously close to 700p, the level on which I have put a sell order. Spirit, the pub chain, also deserves a mention. The shares have put in a strong performance since being recruited last year at 42p. Northern Petroleum, which became a constituent at the same time, is just below my buying price although the shares have been much higher. Estimates of the group's enhanced value continue to circulate. The last figure I saw was 123p a share. The stock market, however, seems unimpressed.

The most recent recruit, Brightside has edged ahead. It, too, should produce half-time figures this month. The insurance broker is expected to join the dividend list with a maiden interim which should foreshadow regular payments. The shares are selling on historic earnings of around 9.5.

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