Derek Pain: Surviving the turmoil and panic of an eventful year
No Pain, No Gain
Saturday 17 December 2011
It's been an eventful year for the stock market with volatility creating more than the occasional bouts of panic. The Footsie blue chip share index has moved between 6,091 points in February to below 5,000 in September, as the euro crisis devastated financial confidence. Amid the turmoil, the no pain, no gain portfolio has fared reasonably well, although its performance, not surprisingly, has varied from quarter to quarter.
Of course, like other investors, I wonder just how equities will, in the long term, respond to Britain's brave and patriotic refusal to join the desperate Berlin/Paris campaign to save the EU's discredited and embattled currency. We will have to wait to see whether the EU and the euro survive in their present form.
It is, perhaps, worth recalling that after an earlier confrontation with the EU, when this country broke away from the exchange rate mechanism, the Footsie embarked on one of its merriest runs and – despite the occasional hiccup on the way – eventually reached a still unchallenged peak.
During the year, the portfolio's profit decreased a little under £1,000 to £98,000. Some years ago the gain nudged £150,000. Dealing costs and dividends are excluded from my calculations. This year it suffered a few disasters. It failed to cover itself in glory with such departed constituents as Clarity Commerce Solutions, offering software to the leisure and retail communities, Lighthouse, an accountancy group and hire purchase provider Private & Commercial Finance.
Clarity managed to rub salt into the wound by falling after its expulsion to a 25p a share takeover bid. The portfolio paid 29.5p and sold at 16p a pop. At one time during its time in the portfolio the shares topped 50p.
The portfolio seems to be facing a Clarity repeat with current member, Patsystems, the derivative software group. It is going through a difficult time and the shares are under pressure. Purchased at 24p, they are now near to 12p. ION Trading has indicated a possible 14p a share bid. For the time being I feel the portfolio should stay put.
However, it has experienced the enjoyment of a quick-fire takeover success, almost doubling its money when brewer Greene King swallowed the Capital Pub Co. The pub chain's shares were only recruited in January, along with Avation, the aircraft leasing group that continues to develop its fleet and has just raised £2m through a private placing at 110p, a level so close to the current price that I have no complaint. The cash will come in handy as it continues to expand its leasing deal with Australian airline Skywest.
Cash and carry chain Booker remains the star performer. The shares started the year at around the 58p mark and have nudged 80p. As I write they hover near 70p. Hargreaves Services, the coal to transport group, is another to have done the portfolio proud.
Whitbread, the budget hotels, pub/restaurants and Costa Coffee shops giant, is well below its year's high, although still recording a handsome gain. But Mears, the support services group, has been a disappointment, reacting badly to a fairly mild profits warning.
Plus-traded Rivington Street Holdings, a software and financial group, seems to have lost much of its exuberance. Indeed, I wonder whether its lacklustre performance in the past few months is partly due to the proposed sale of its corporate finance division and founder Tom Winnifrith's decision to step down as chief executive although remaining an active board member. The shares were topping 50p around mid summer.
I indicated in last week's column that I may drive away from the other Plus constituent, NCI Vehicle Rescue. On further reflection I have decided to give the shares the old heave-ho, locking in a small profit.
Northern Petroleum, one of my 2011 recruits, has raised cash by selling an interest in a Dutch gas field and also completed an encouraging seismic survey in the Southern Adriatic. Meanwhile, TEG, the composting group added only four weeks ago, has managed to edge ahead from my buying price. Stockbroker Brewin Dolphin has taken on the group's brokership, and in its first comment declared that the stock market has "over compensated" for TEG's problems and pencilled in a 22p target price.
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