Derek Pain: Stock Spirits' performance is enough to drive me to drink

The company, which sells a range of alcoholic drinks in Central and Eastern Europe, is deep in the No Pain, No Gain portfolio's red

Last week I highlighted the No Pain, No Gain portfolio's debt to the drinks industry. But one constituent's sobering performance is undermining the cheer factor: Stock Spirits, recruited a year ago, has become a bitter disappointment. Yet according to the investment house Jefferies, and the company itself, trading could improve significantly.

Stock Spirits, which sells a range of alcoholic drinks in Central and Eastern Europe, is deep in the portfolio's red. The shares were enlisted at 278.75p; they are, as I write, just below 200p.

It is certainly unusual for a drink constituent to be so flat. I have acknowledged my unease by putting a 180p stop loss on the shares.

But the chairman Jack Keenan has described prospects as "very promising" and Alex Howson, an analyst at Jefferies, has produced a "buy" recommendation. He says he is "cautiously optimistic", although his target price of 260p fails to provide me with much comfort.

Stock Spirits has been hammered by a 15 per cent duty increase in Poland, its main market. So with sales down by 14 per cent at €292.7m (£209.1m) in 2014, profits were well below earlier expectations. The higher tax in Poland has prompted some fierce competition and the company has so far refused to join the ferocious price "war" that has developed.

The Stock Spirits performance contrasts with almost every other drink share recruited to the portfolio. Besides the takeovers I mentioned last week, which provided rich pickings, the two current members, Marston's and Whitbread, have emerged as rewarding investments.

Marston's remains a significant brewer, and although Whitbread has abandoned its brewing heritage after more than 250 years, it retains a substantial pub/restaurant chain and can still be regarded as a member of the drinks sector.

The duo are longstanding portfolio constituents. I am not too happy about my more recent recruits: Patisserie and Interserve are modestly below my buying level. Still, the restaurant chain Fulham Shore, which joined late last year, has moved ahead and more than made up for the retreats.

With the stock market recording new highs, share selection is becoming more difficult. I am not too concerned about Patisserie and Interserve; they will, I am convinced, emerge as sound long-term additions.

As I've said before, I have a number of shares under consideration, and when the time is right I intend to lift the portfolio, currently a dozen strong, to my preferred level of 15 or 16. Among the shares on my possible shopping list are Distil and Gfinity. Distil, a drinks business, seems to be making progress with US hopes running high. Gfinity, a virtual sports events promoter, could have latched on to what should be a growing market.

Both shares represent something of a gamble. Peel Hotels remains a candidate.

I come finally to a former constituent, the internet group Access Intelligence.

I have complained recently about companies that, seeking online participation, have relied on inertia. To retain hard copies of reports, shareholders are told to contact the company. If they don't, their only link is online – and I suspect some small investors are now isolated from their shareholdings. But not at Access. It has decreed that should a shareholder want electronic communications, it must be contacted (a stamped, addressed envelope is provided). Anyone wanting documents can sit back – and do nothing. What a happy change.