Derek Pain: Why patience is still a virtue when it comes to shares

No Pain, No Gain
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The Independent Online

I touched upon recruiting former no pain, no gain portfolio constituents last week. Mears, the support services group, was accorded an honorary mention. Since then the shares have, as I write, hit 454p, reflecting an impressive trading statement.

The company was re-enlisted in March 2009 at 272p a share. I must admit I was dubious about its return. In the portfolio's early days the shares were taken on at 23p. My policy is to invest a notional £5,000 in each constituent. Selling the Mears stake produced £18,260. Not bad for a few years' involvement.

Could such a return be repeated? I doubted it. And during the period of its re-inclusion, Mears produced some awkward moments, making me wonder whether I had misjudged another foray. Several times the shares seemed intent on falling below 200p, and indeed in late 2011 they appeared about to achieve such a misfortune. But thankfully, the price remained above 200p and since then, with a few hiccups, it has got stronger.

Many times I have advocated that investors, particularly small players, need to exercise patience. It is easy to get panicked into selling when a share goes into reverse.

When a share declines for no apparent reason it does create anxiety. Recently I admitted to being worried about the performance of constituents Marston's and Whitbread. I didn't sell and the respective responses have justified my inaction. But it is always wise to be prepared for the possibility of a looming disaster.

Whitbread remains a debating stock among City analysts. For example, Bank of America Merrill Lynch has raised its target price to 3,850p, while Morgan Stanley is more subdued, suggesting 3,400p.

The Mears trading update mentioned a £3.7bn order book reflecting "strong spends" by councils and other authorities. Both social housing and home care divisions made progress. And chief executive David Miles added that Morrison Facilities Services. a heavily loss-making social housing business taken over a year ago, would make a contribution to group profits in the second half of the year.

Another constituent, the Spirit Pub Co, has satisfactorily reshaped a large chunk of its borrowings and the shares have regained their 78p peak.

Animalcare, the veterinary products group that has been a constituent for two years, has yet to justify my purchase. The shares have edged into the black after a period among the portfolio's loss-makers. The price is 178p, compared with the 171p the portfolio splashed out. I am disappointed but I am hanging on as the company is making solid, albeit not impressive, headway.

A trading update last week failed to stir any excitement. Stockbroker Panmure Gordon was, however, prompted to repeat its target price of 245p.

Finally Avation, the Singapore-based aircraft leasing group that operates in Australia, although registered in London, and has a full stock market listing. It announced earlier this year that it intended to adopt US dollars rather than pounds when producing figures.

The first set of dollar results have appeared. They included a dividend payment expressed in cents. I had visions of investors being forced to take dollar cheques to their banks.

But Avation is performing the conversion based on the dollar/sterling exchange rate on 4 November. It works out at 1.11p a share.

Avation was at one time one of the portfolio's loss-makers. But it regained the trading altitude that first attracted me and the shares have achieved a 130.5p peak. The portfolio paid 83.5p but earlier this year the price was around 60p.

Impressive results of $14m (£8.75m) at the pre-tax level against $8.1m started the more high-flying performance along with institutional buying and some modest share buy-backs.

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