Derek Pain: Procrastination can sometimes be the way to good luck

No Pain, No Gain
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The Independent Online

Investment and luck have an uncomfortably close relationship. Once again I have experienced good fortune by managing to avoid Healthcare Locums, the medical recruiter that is currently in the critical care ward. It was only a few years ago that I almost added the shares to the No Pain, No Gain portfolio. But while I dallied the price soared into the stratosphere, prompting a re-think.

I am often accused of dawdling over new investments. But for my admittedly fortuitous caution I thank my lucky stars. I would have enlisted the shares if the price had not shot ahead, making them far too expensive. Since those heady days when Healthcare Locums could, in the stock market's view, do no wrong, the group has endured a horrendous and humiliating time, suffering such wounds as accounting irregularities and huge losses. To make matters worse, executives have departed, there has been a share suspension as well as a desperate cash raising exercise. And, just to pile on the agony, litigation is on the horizon.

The shares now limp along at around 2.1p, valuing the company at £17.8m. When I was looking at them they were enjoying a spectacular run, with the group producing profits of £15.8m, followed by £17.7m and suggestions the next milestone would be £31m. Instead came a £56.5m loss and then the latest return, a £12.9m deficit. If I had descended on the shares the portfolio would have paid the equivalent of about 26p – so an enormous escape. Mind you, I might have avoided one reverse but the shares I enlisted instead have not been an outstanding success.

However, Marston's, the brewer of such traditional English ales as Pedigree and Brakspear, is at least showing a profit – if only pennies – and offers any investor who picked up the shares a yield close to 6 per cent, a splendid return in these low-interest-rate days. I continue to rate the shares – for too long sidelined by the City. The company, in a difficult climate, seems to be performing quite well and the continuing expansion of its pub/restaurant estate is benefiting profits.

Lady luck, however, is a fickle creature. I could relate various examples when the portfolio has suffered from misfortunes – or, perhaps, my misjudgments. Indeed one of the portfolio's most disastrous ventures has returned to haunt me in the shape of Green Compliance which has recently, after many tribulations, at last got round to issuing a fairly upbeat trading statement.

Readers may remember the company as Wyatt. Then it had an array of on-line services covering such areas as tax and employment.

The shares were recruited in April 2003 at 27.5p a pop. It was an unhappy investment, falling into the penny dreadful category even before the group decided on a restructuring that took it into new areas under the name of Green CO2. Now, following another revamp, it is Green Compliance and is involved in water hygiene, pest control and fire protection.

The poor share performance and subsequent share restructuring almost wiped out the portfolio's investment. In the end it escaped with a miserly £200 or so from its original £5,000 stake. If I had held on, the portfolio's coffers would have been even more depleted as the twice-consolidated shares have more than halved in the past year. The price is now 23p, capitalising the company at £8.4m.

Still, it appears that Green Compliance has at last got its act together. The chief executive, John Prowse, talks about a "solid trading outcome" for the year just ended. He is busy putting together, through a series of acquisitions, what should be a serious player in the group's three chosen activities.

After such a bruising encounter I don't think the portfolio will return to Green, even if things are looking up and it could be argued that there is every chance the shares are now wickedly undervalued.

The portfolio was out of luck on the two previous occasions it returned to past constituents. Myhome International, a franchise group, went bust, although overall, thanks to the initial involvement, the portfolio managed to escape with a reasonable profit.

Mears, the support services group, is the other re-investment. The shares are below my second-time-around buying price, yet happy memories still linger about their earlier contribution.

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