Derek Pain: We are only human, and some of my deals return to haunt me

No Pain, No Gain

All investors must at times indulge in what is invariably the unrewarding exercise of back jobbing. The temptation to examine what might have been can, on occasions, be irresistible. What if I hadn't sold when I did or, perhaps, why the heck did I get involved in such rubbishy shares are just two examples of what is often a futile exercise.

Human nature more or less commands that we look back. Although in some occupations it is necessary and productive, the poor old shareholders' chances of reaping any benefits are pretty slim. Still, it is a self-satisfied investor who does not allow past errors to sometimes haunt their thoughts. I must confess I often find myself back jobbing, wondering about some of my past decisions involving the no pain, no gain portfolio. Obviously some of my more crass moves have had a significant influence on its overall performance.

Among my most infuriating actions was selling Anglo Pacific, the mining investor, at 15p after buying the shares at 16p. The price has since hit 360p and now resides at around 308p.

It could also be argued that my early indifference to Asos, the internet retailer, is even more calamitous. When the shares were near 5p I lunched with the company but failed to spot its potential. Subsequently, as the shares climbed to 30p, I described them as a long-term buy but suggested investors should wait a while as the price may have overreached. With the shares now near 2,400p I cannot help thinking what a decisive influence they would have made to the portfolio. My one redeeming thought is that I would almost certainly have sold, long before the shares arrived in the stratosphere.

Unfortunately others have got away. Indeed this year I dillied and dallied over Lamprell, an oil back-up firm that I feel is now fairly priced. Wm Morrison, the supermarket chain, is another recent candidate that I may have allowed to run ahead of my game.

The portfolio has also descended on some pretty awful shares. Three constituents, My Home International, Profile Media and Pubs'n'Bars went belly up.

I have always been fascinated by small caps. But, of course, they are much riskier than blue chips, although it should always be remembered that occasionally top flight shares end up in the knackers' yard.

On the whole, small caps have served the portfolio well. Some, like Burtonwood, a pubs chain, and Merrydown, a cider and soft drink maker, fell to lucrative takeover bids. Indeed until about four years ago the portfolio enjoyed a handsome degree of bid action. But, although there are signs that corporate activity could be on the increase, the extent it embellished the earlier years of the century has yet to be regained.

Among small caps it is the explorers and miners that have dominated the stock market's undercard in the past few years. Fortunes have been garnered. But my attempt to join the resources fun ended in acute disappointment. The portfolio alighted on Nighthawk Energy at 44p and watched the shares top 100p. I stuck with them, despite a long and traumatic retreat, eventually bailing out at a miserable 14p. The price is now 6p. An example of being too slow to sell up.

Invariably investors make mistakes. We are only human. One consolation is that highly paid fund managers, with their huge back-up resources, also get caught out.

The obvious response is to get substantially more winners than losers and in this day and age that should be possible over the longer term. The portfolio, which does not acknowledge dividend income or dealings costs, remains comfortably in profit, in spite of past disasters. It is a straightforward buy and hold investor and does not generally indulge in quick buy and sell excursions that often only enrich stock market dealers. Such rarefied activities as short selling are also off limits.

There is a little portfolio action to report. The security giant G4S said first-quarter revenue was up 4.7 per cent but margins were slightly lower and a couple of other constituents – Booker and Whitbread – attracted analytical comment. Citi examined Booker and concluded that the shares are a buy, and Credit Suisse cut its Whitbread target price to 1,992p but reckons the shares will outperform.