Derek Pain: Portfolio mourns for Pubs'n'Bars' last orders

No Pain, No Gain

The no pain, no gain portfolio has continued its recovery – but only just. The overall gain has edged ahead to nearly £98,000 from September's calculation of a little over £96,000.

I suppose any improvement – even an exceedingly modest one – is better than shipping punishment. But I had been nursing hopes that the profit would top £100,000, representing some two-thirds of the peak achieved before the recession hit home.

Still, the stock market, despite this year's surprising strength, remains a long way below its level of a few years ago. Indeed, the Footsie seemed to be advancing relentlessly towards its all-time peak of nearly 7,000 points (hit around the turn of the century in the dot.com boom) before the Northern Rock disaster heralded the destruction that would have to be endured.

A year ago the portfolio's profit, which excludes dividend payments, had dwindled to £79,000. A few abysmal investments have restrained its recovery, but I am loath to dump my walking wounded.

One, the heavily indebted Pubs'n'Bars, has departed of its own volition as its shares have been suspended and, regretfully, administrators called in. Others could offer some salvation – or at least a sufficient share price improvement to allow the portfolio to escape with some pride.

The rest look a reasonable collection and could offer rewards for the buy and hold investor. The portfolio has enjoyed many successes – and some disasters – in its near 11 years' existence. Investing, however, can be a frustrating occupation and the wayward display of a few shares is particularly galling. So, perhaps not surprisingly, I am disappointed with the short-term performance of some constituents.

Nighthawk Energy is one. The shares are around 32p, although on the available evidence they should be much higher. The trouble is much of the "evidence" is estimates of its US gas and oil reserves. No matter how authoritative such projections, there is, particularly in the hit-and-miss world of exploration, still substantial doubt. Even so, estimates of the group's worth remain way ahead of its current valuation.

Analyst Thomas Jones at researcher GE&CR has a 227p target price and one estimate of a reserve prompted Peter Bassett at stockbroker Westhouse Securities to say it would be "the equivalent of finding a large North Sea or West African oilfield".

Following its last share placing, Nighthawk has no near-term cash worries. And it is producing, though probably below what some observers expected. Although I am a little concerned about the poor performance of the shares, I am sticking with them.

Marston's has also failed to offer inspiration. Last week's results were mixed but offered encouragement. True, pre-tax profits collapsed, but property write-downs and other non-cash, one-off charges were largely responsible. Without these impediments the adjusted pre-tax profit was a little better than forecast. And there are signs that trading is improving, an experience most other quoted brewers and pub owners are also enjoying.

Stockbroker Astaire feels that Marston's, offering a six per cent-plus yield and backed by assets of around 138p a share, is a buy.

Mears has also attracted stockbroker attention. Collins Stewart examined the home care side of the support services group that still gets most of its income from its social housing operations. Based on domiciliary care prospects Collins' analysts Julian Cater and James Gilbert believe Mears is a buy and added a 335p target price.

They talk about consolidation in this growing market and suggest Mears has the wherewithal to achieve a significant expansion. In his last trading statement, chairman Bob Holt said Mears was "well placed to take a leading position in the consolidation and evolution of the domiciliary market".

Of the 15 portfolio constituents, Mears, which floated at 10p in 1996, is the only one to have been enlisted twice. It was an early (and highly profitable) recruit. The shares joined at 23p and were subsequently – probably unwisely – sold at 71.5p. They went on to hit 380p. I am, however, still awaiting the second bite at this particularly cherry to pay off. Although arriving at the Collins 335p target would be a pleasing experience, I am looking for a higher price.

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