Derek Pain: Portfolio's still in profit after 13 years of ups and downs

No Pain, No Gain

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The Independent Online

Christmas Eve is often a time when many of us cannot resist the temptation to look back over the past 12 months and, possibly, wonder where we went wrong. I am, however, indulging in a much more time-consuming exercise – the near-13 years the no pain, no gain portfolio has existed and, I hope, enlightened – even enriched – its Saturday-morning followers.

The portfolio was born in February, 1999, a few months before I retired as The Independent's first stock market reporter.

It's been a roller coaster ride with some stunning successes and, unfortunately, a number of unmitigated disasters. A few years ago the portfolio's gain nudged £150,000. Now it is around £100,000, party reflecting the reluctance of investors to pursue small caps in these treacherous times.

Its first share was a now-forgotten company, called Regal Hotel. In those days it was a rapidly expanding group. It probably grew too quickly and fell victim to a not particularly generous takeover bid. Still, in its early days, bids formed a major part of the portfolio's temperature. Although Regal was a disappointment, a succession of deals provided much-appreciated windfalls. The likes of Burtonwood, a pubs group, Merrydown, a cider maker, and supermarket chain Safeway, succumbed to bid action.

During the first half of the last decade, when various forms of corporate activity were all the rage, the portfolio probably enjoyed its fair share of excitement with obscure small caps like IDN and Paramount adding to the cash pile.

But as the decade progressed the flow of bids and deals started to dry up, and once the banking crisis materialised they even became an endangered species.

However, some still occurred. Allied Domecq, once the nation's biggest brewer which had evolved into one of the world's leading wine and spirit groups, bowed to a long-rumoured bid. And Scottish & Newcastle, the last independent remnant of the once all-powerful "big six" of the British beerage, departed after a joint strike by Carlsberg of Denmark and Heineken of Holland.

In the last couple of years, as the banking crisis was followed by the euro débâcle and deep worries about the very future of the entire eurozone, the portfolio had to exist with only the occasional takeover windfall. Capital appreciation, through trying to spot undervalued shares and those with a recession-proof future, became the name of the game. The portfolio has found the occasional winner. Among early hits I cashed in were Mears, the support services group, Interlink Foods and Stagecoach, the transport group. This trio underline the vagaries of the stock market. Mears subsequently soared comfortably past my selling price only to fail to perform when re-recruited; Stagecoach has done quite well and Interlink eventually went belly up.

It would be foolish – and dishonest – to pretend it has all been plain sailing. There have been too many disasters for comfort. In addition to shares sold at a loss, the portfolio has had to soak up the humiliation of alighting on companies that ended up as busted flushes. Profile Media, which seemed to have carved out a publishing niche for itself, and MyHome International, once a promising franchise group, are among my total wipe outs.

The portfolio invests £5,000 in each constituent. Dealing costs and dividends are ignored in my quarterly performance calculations.

I have often wondered whether I should include buying and selling costs and dividend income to give a more accurate indication of how my little collection of shares has performed. I reckon their impact would enhance the overall performance as quite a few former constituents, like and Scottish & Newcastle, enjoyed high dividend yields. But, with its 13th birthday approaching, I think it is too late to change and any switch in the quarterly sums would be rather messy and merely muddy the waters.

Clearly there have been some savage swings and roundabouts since the portfolio arrived with, for example, the blue-blood Footsie share index achieving a 6,950.6 points peak in the madcap internet boom and even declining more than once to uncomfortably close to the 3,000 level. I do, therefore, take some satisfaction from the fact that the portfolio is still showing a reasonable profit, although the debilitating impact of inflation cannot be ignored.

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