High-flyers need some ballast

Share Club
Click to follow
The Independent Online

There are now around 4,000 share clubs in Britain, meeting regularly to pool cash and invest in shares. For the past year and a half we have followed the fortunes of the Reservoir Dogs, a group of London friends.

There are now around 4,000 share clubs in Britain, meeting regularly to pool cash and invest in shares. For the past year and a half we have followed the fortunes of the Reservoir Dogs, a group of London friends.

In the 18 months since we started we have made quite a killing. Our portfolio has risen 65 per cent, with one stock - Prelude Trust - rising by 107 per cent since we bought it last November.

The problem facing us now is ensuring our portfolio does not become unmanageable. Most clubs stipulate a maximum of 20 shares and we have 17. But ever more share-buying opportunities keep appearing so what should we do?

One solution is to run different portfolios. We now have three, each containing markedly different types of shares. Our main portfolio contains UK-based, growth-oriented shares, heavily focused on the technology sector. We don't buy pure internet plays - although we have one stock in this category - but companies that make or manage the technology behind, not just the internet, but the mobile information revolution.

Prelude Trust is a typical company with outstanding results. It is like a traditional investment trust backing technology companies, but the companies it invests in are anything but traditional - new computer transfer systems, global positioning technologies for mobile phones and software support to defend internet sites from hackers. With shares at £2.20 and a net asset value of £1.15, the price has a lot further to go.

AEA Technology is another company with excellent technological expertise but, by contrast, a lousy share rating - as has Dialog with its proven information technology systems.

Our second portfolio is a more traditional "value" portfolio investing in UK companies with a proven track record of cash flow and profits. Nearly all the companies generate solid dividends and growth prospects - but the share price increases are much less spectacular.

Our third portfolio holds foreign shares, but we only have one now. US-quoted Virata, which has risen 80 per cent, has a similar background to UK wonder stock ARM Holdings. Recent results showed turnover powering ahead and US investors are just waking up to the opportunity.

Buoyed by this success we are stepping up our investment programme abroad. There is a massive stream of new US shares, or initial public offerings (IPOs), every day: 95 per cent should be avoided, and the others are fetching ridiculous prices. But now and again a fascinating company with great ideas emerges. Our strategy is simple - we want to catch what US investors call a "tenbagger". This is a share in a new company that rockets up at least tenfold - usually companies with market-dominating great technology. By following top US internet sites we will buy a small amount in one new issue every month, and hope that we've caught the right fish.

We're also interested in European shares, but the critical issue is access to information in English. A great newsletter appears at www.europeaninvestor.com offers a great newsletter and US investment house www.wisi.profiles runs a superb database of world shares - both are a simple way to start.

Looking for credit card or current account deals? Search here

Comments