Derek Pain: Recent recruits put my portfolio in the money

No Pain, No Gain

The stock market has been experiencing one of those uncertain runs that occur every so often. Some alleged experts suggest investors are at last appreciating the increasing difficulties facing the world's economy, while others maintain that shares are cheap and offer inviting returns. I am on the side of the bulls; there is still much to go for, and there is absolutely no reason why anyone should be panicked into selling sound stocks.

Since my last quarterly review, the no pain, no gain portfolio has edged ahead and is now in the money to the tune of some £107,000. I owe a considerable debt of gratitude to my last three recruits: Avation, Capital Pub Co and Rivington Street Holdings.

I was a little slow alighting on Avation and Capital, and I cannot help reminding myself that if I had been a shade more adventurous, this chalk-and-cheese twosome would have made an even greater contribution to the portfolio's wealth. After all, Avation was 58p when I first commented on the aircraft leasing group, and Capital was around 105p. I eventually climbed aboard at 83.5p and 120p in January.

My timing was rather better with Plus-traded Rivington. It arrived a few months earlier at 27.5p; as I write the shares are 49.5p, pricing the rapidly expanding conglomerate at approaching £20m. I expect further progress. Indeed it seems one investor has acquired shares at 57p.

Major shareholder is chief executive Tom Winnifrith, with around 30 per cent of the capital. The City's takeover panel has decreed that without triggering an obligation to mount a full bid he may continue to increase his interest through share buybacks and exercising options, but not via stock market purchases.

In a trading update, covering the first eight months of its current year, Rivington, still ignored by institutions, appears supremely confident. Underlying pre-tax profits – up 177 per cent at nearly £1.1m at the six months stage – are still in line with expectations. In addition to profitable operations, such as the group's corporate side, which continue to do well, losses at a subsidiary have probably been eliminated, and it could end the year in a break-even position or even in profit. In the first half this particular off-shoot lost some £200,000. And losses at the recently launched cut-price stock-broking business are decreasing and profitability is in sight.

Subscriptions for the group's latest EIS fund closed this week, and there are plans for another unit trust, this time concentrating on India. In recent times Rivington has been extremely acquisitive. But in the past few months deals have been conspicuous by their absence. Still, it remains on the look-out, but insists it will not overpay.

Elsewhere in the portfolio, Booker, the cash and carry chain, and Hargreaves Services, the coal-mining to transport group, have performed encouragingly. Even Mears, the support services group, has shown signs of overcoming the weakness which followed year's results. After falling below 240p, the shares laboriously climbed to 280p – putting the portfolio in profit – but are now round 267p.

A former constituent,, has produced year's figures. The group, which at the time of its exclusion ranked as the longest-serving portfolio member, suffered a 23.1 per cent pre-tax profits fall to £1.31m. Still, the dividend was held, putting the shares, at 36p, on a remarkable 8.75 per cent yield. But with profits in decline I wonder just how much longer it can hold the payment. The portfolio does not benefit at all from dividend payments and my decision to sell, taken reluctantly in view of what was an association going back to 2004, has been justified as the shares remain near my selling price. and Private & Commercial, the hire purchase group, were the casualties when Avation and Capital were recruited.

I remain on the hunt for additions. I am still debating the merits of Wm Morrison, the supermarket group. Its apparent pursuit of Iceland, the frozen food chain, could prompt some uncertainty. Besides the possibility of more shares being issued, investors may recall that its last major takeover, the Safeway supermarket group, in 2004 took rather a long time to bed down. Morrison has also been gobbling up its own shares – an exercise I am not keen on.