Derek Pain: The tiddlers perform well, but perhaps it's time to add weight

The No Pain, No Gain portfolio's two heavyweights have been in profit action. Although Lloyds Banking Group and the Whitbread leisure group inhabit very different worlds, they have both produced encouraging figures even if the stock market, at least at the time of writing, has refused to offer much encouragement.

During the portfolio's 15-plus years I have concentrated on the small caps contingent, recruiting only a relatively few Footsie and middle-ranking stocks. Of the current 15 constituents 11 are – or have been – AIM or ISDX-traded shares. On the whole the tiddlers have performed quite well, but I am wondering whether another more substantial company would add a little weight: perhaps, Serco, the troubled support group. After all, with Rupert Soames, the man who has masterminded the growth of temporary power supplier Aggreko, now installed as chief executive and a successful £160m share placing completed, it should soon be on the recovery route. The shares, last year approaching 700p, are now around 340p; the placing was at 320p. For a long-term investor there are clear attractions.

Whitbread's progress continues. Revenue was up an impressive 13 per cent last year with underlying profits plus 16.5 per cent to £411.8m although some exceptional charges left pre-tax profits at £347m against £343.2m. Still the year's dividend advanced 19.9 per cent to 68.8p a share – not bad in these low interest rate days.

The Costa Coffee side is gathering even more momentum. The old brewer, once famed for Tankard bitter, now seems intent on caffeinating the world. It already has 2,880 coffee parlours and is intent on opening many more.

Premier Inn also contributed; again, expansion is paramount. The chain, for so long the weak link, increased sales by 3.9 per cent.

The shares, recently around 4,500p are not much above 4,000p, but although still expensively rated, retain their appeal. Profits are likely to hit £480m this year. The portfolio paid 1,105p a share.

Lloyds produced profits of £1,369m in the first quarter of the year against a heavy loss in the preceding three months. The group, now much more of a traditional domestic bank, is expected to let small investors participate in the enforced flotation of the TSB banking arm in the summer. It seems complaints about us small players being arbitrarily excluded from many floats have had some impact – after all, when the Government twice reduced its Lloyds involvement, only institutional investors were invited to take part. Likely inclusion in the TSB share sale comes on top of Saga's courting small investors in its upcoming flotation. Lloyds shares are about 80p against the portfolio's 74.8p.

Now to small cap constituents: power generator Alkane Energy reports a slightly lower output in the first three months of the year, perhaps due to milder weather. But the outlook is fairly encouraging, with 76 per cent of the year's expected production already contracted. The shares are a shade below the portfolio buying price at 40p.

Avation, the aircraft leasing group, has again lifted its controlling stake in AIM-traded Capital Leasing. The interest was increased in March to 64.46 per cent and has since risen to 65.4 per cent. Both deals were conducted at 15.25p a share. Can a deal to mop up the outstanding shares be far away? Probably not. Avation shares are 124p against an 83.5p buying price.