Derek Pain: Out with the old and in with the new ahead of year of opportunity
Iintend to make some significant changes to the no pain, no gain portfolio. The new year provides an ideal opportunity for such an exercise which will, I hope, allow my little collection of shares to face the vicissitudes that probably lie ahead.
Progress in the past year was not as strong as I had hoped. True, profits moved ahead. But the advance should have been more compelling. Perhaps some ins and outs will have the desired impact.
My guess is that shares will again make headway this year although the going is likely to be exceedingly tough. The Footsie index could, I believe, close 2011 at around 6,300 points. Attempting to predict is always a hazardous exercise and the observation that there are only two kinds of forecaster – those who don't know and those who don't know they don't know – is never far away. Many believe that attempting to predict Footsie's level in 12 months' time is a waste of time (and space). Still, its an exercise I have attempted, with varied success, for many years and I do not see any reason to switch off now.
The economic outlook is not encouraging, with consumer spending under increasing pressure, There is also the possibility that many companies will only be able to increase profits by again slicing costs and not through growth. Hardly a happy prospect. But the stock market always endeavours to look ahead. There could well be some indications that the world's economy is really on the mend as the year progresses and shares should respond to any prospect of happier times. Such an improving atmosphere could provoke a revival in corporate activity which would add fuel to any recovery.
But a collapse of the euro – a distinct possibility – could destroy any wellbeing. Although, in the long run, the demise of such a controversial and politically inspired currency, would be beneficial, the short-term ramifications could be huge, shattering confidence in stock markets around the world. With so much uncertainty abounding I feel obliged to reshape the portfolio. I am dumping Printing.com and Private & Commercial Finance. The departure of Printing.com is rather sad. It is the longest serving constituent, having clocked six years of membership. But I fear there is a grave danger that the dividend will be cut this year. Profits are declining and in the current atmosphere I cannot see much hope of any trading improvement. The hearty dividend yield, around 8 per cent, represents the main prop for the shares. The possibility of a modest payment reduction may already be factored in to the share price but reality could have quite an impact. PCF's horizons seem limited. Quite simply my patience is exhausted.
I am also looking closely at a few other constituents, mainly Hargreaves Services and Mears. Both are well run. Hargreaves is one of my current successes but its exposure to the coal industry in this all-enveloping age of global warming hysteria could herald problems. Mears social housing and home care activities should not be pressurised by the Government's spending cuts but the stock market appears far from convinced that the group will escape the axe. The shares are highly rated and, like Hargreaves, offer a thin dividend yield. NCI Vehicle Rescue could also go – the belated interim figures were not encouraging.
Such a shake-up would leave some gaping holes in the portfolio. The relegation of Printing and PCF would reduce its strength to 12. If Hargreaves, Mears and NCI are also ditched – and I have yet to decide – only nine will be left standing. Recruits are essential, particularly as my favoured number is 16 shares.
In November I mentioned that I am minded to enlist Avation, an aircraft leasing group, and the Capital Pub Co. with around 30 mainly freehold outlets in and around London. A few others are also under scrutiny. They include Wm. Morrison, the supermarket chain, Ladbrokes, the betting group, and Lamprell, an oil equipment and servicing group.
Should Morrison join up it would represent a link with the portfolio's infant days, nearly 12 years ago. For one of its constituents then was the Safeway supermarket chain, victim of a hostile Morrison take over. The action, however, was not a great portfolio result.
- 1 What, let gays get married? We must be bonkers
- 2 Rocky Horror star Tim Curry 'suffers major stroke'
- 3 Exclusive: How MI5 blackmails British Muslims
- 4 EDL marches on Newcastle as attacks on Muslims increase tenfold in the wake of Woolwich machete attack which killed Drummer Lee Rigby
- 5 Farewell, Shameless. Your heirs have work to do
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Nook is donating eReaders to volunteers at high-need schools and participating in exclusive events throughout the campaign.
Get the latest on The Evening Standard's campaign to get London's children reading.
Win anything from gadgets to five-star holidays on our competitions and offers page.
Day In a Page
A modern home of almost 1,000sq ft is close to Stoke Newington's high street. £499,950
A five-bedroom bungalow in Hoveton with riverside garden and mooring dock, £550,000
A refurbished one-bedroom flat with south-facing reception and high ceilings. £579,950
A four-bedroom Grade II-listed house in Nazeing with large gardens. £550,000
A modern four-bedroom house in a converted stable within walking distance to Peckham Rye. £695,000
Three-bedroom house in a quiet residential area within close distance to Battersea Park. £450,000
A three-bedroom cottage within commuting distance of London, Norwich and Cambridge. £250,000
A two-bedroom cottage with a sun room and gardens in South Chard. £350,000.
A three-bedroom semi-detached house with original features including fireplaces and wooden flooring. £399,950
A modern two-bedroom flat split across two floors and close to several public transport links. £595,000
A one-bedroom flat with an open-plan reception/kitchen and private balcony. £315,000.
A bright two-bedroom garden flat between South Acton and Chiswick Park. £499,950.
A listed four-bedroom farmhouse with stables, set in four acres. £500,000.
A three-storey family home with four bedrooms and an extended kitchen/diner. £995,000.
A three-bedroom Hamstone cottage in the rolling Somerset countryside. £430,000.
A luxury one-bedroom apartment on the first floor of a converted Victorian house. £425,000.