The no pain, no gain portfolio lost much of its boozy image in the first half of this year. Three constituents - each in the drinks industry - were ejected and five, covering such diverse activities as home cleaning and indoor football, recruited.
The departing trio were victims of takeover activity. Early in the year the Burtonwood pubs chain fell to the Wolverhampton & Dudley Breweries. Then cider maker Merrydown was captured by the unquoted SHS drinks group and last month I sold the portfolio's holding in the Allied Domecq wines and spirits giant ahead of its acquisition by Pernod Ricard. The portfolio reaped rich rewards . Burtonwood shares, purchased at 185.5p, went for 570p; Merrydown for 170p against a 35.5p buying level and Allied produced 680p compared with the equivalent of 238p.
Scottish & Newcastle, the nation's biggest brewer, is now the portfolio's sole drink representative. In view of the generous profits enjoyed I would like to recruit more booze stocks. But the industry's consolidation drive has, pushed most candidates to levels I resent accommodating.
I am relatively happy with the five newcomers. Access Intelligence, Georgica, Goals Soccer Centres and Lennox are modestly in the black whilst My Home International, a house cleaner traded on the fringe Ofex share market, hovers around the price I paid. Both Georgica, running ten-pin bowling alleys and snooker clubs, and Goals Soccer, which has five-a-side football centres, greeted their inclusion by giving ground. But they have since rallied. Indeed Georgica, which has raised £60m to revamp its debts and help with expansion, produced a remarkable first-quarter 30 per cent profit advance.
And last week Access, which provides online advice and support for businesses and other organisations, kept its promise to expand by splashing out £1.5m in cash and shares for Due North, a developer of e-commerce solutions. Deferred payments are scheduled if the acquisition achieves its profit targets.
I have agonised over the inclusion of Avon Rubber and MacLellan. They have both failed to perform. On several occasions I have been on the verge of ditching them and I had resolved to deal the fatal blows in this, my mid-year review. But I have decided to hold fire.
I am impressed with Avon's acquisition of a US gas mask company, which should be earnings enhancing. The automotive industry remains in the slow lane and it would be foolish to expect it to produce much in the way of profit mileage. But other activities are doing well and its main US gas mask contract should soon start to deliver. As it was the group's respiratory equipment that attracted me to the shares I have decided on a stay of execution. MacLellan has, for a change, not been active on the takeover front. But that may be no bad thing. A little bedding down could be over due. And there is always the possibility that the unidentified predator that made overtures earlier this year could return with a bid.
I have, however, decided to part company with an old faithful - S&U, my longest serving share. I recruited it in April 1999, just after the portfolio was born. I took up the shares at 292.5p. Initially they performed poorly. But then they took off, for a time nudging 600p.
My reason for selling has nothing to do with the quality of the company. Like Avon and MacLellan, S&U has top-class management. Outside influences, in the shape of a Westminster inspired probe into the money lending business, are behind my decision to cut and run.
In the present nanny state climate doorstep lenders appear to be an all too obvious target for some of those righteous blows so beloved by the politically correct that rule our lives. Although many firms offer an essential service I get the impression the industry could face some draconian curbs. In addition S&U's car hire purchase side may be slowing down. So I am selling the shares at 525p. After all it is never wrong to take a profit. With their high dividend yield the shares of this family-controlled company have been a splendid investment. I wish all my stock market excursions were as lucrative.
The portfolio is still recording a reasonable profit. According to my calculations it is now more than £76,000 in the black, with the cost of investments standing at £185,000.Reuse content