No Pain, No Gain: Bargains are out there, and I'm looking for recruits

It has been a disappointing year so far for the stock market. There have been a few false dawns when shares threatened to recapture the sparkle they displayed towards the end of the last millennium. But any such exuberance has left little impression and the Footsie index has gone nowhere - hovering near the level at which it opened this year's proceedings.

It has been a disappointing year so far for the stock market. There have been a few false dawns when shares threatened to recapture the sparkle they displayed towards the end of the last millennium. But any such exuberance has left little impression and the Footsie index has gone nowhere - hovering near the level at which it opened this year's proceedings.

Against such an uninspiring background, the No Pain, No Gain portfolio has performed relatively well. There has been one change since the last review, the sale at 50p a time of the building and construction group GallifordTry. Those shares are now 50.75p. The portfolio achieved a £7,500 profit, making it a rewarding investment. There is, I realise, the chance of takeover action at Galliford. But I felt the wisest course was to lock in profits on a share that did not instil much confidence.

I remain convinced that the stock market as a whole is undervalued and major investors will eventually get the message that bargains lurk among blue chips and smallcaps. I am, therefore, sticking with my new year view that the Footsie should end this year at around 5,000.

I realise that for quite some time I have been predicting, with a conspicuous lack of success, that the blue chip index will get back to 5,000. There is, of course, nothing more boring than a perennial optimist who refuses to recognise that a glass could be half empty. But, despite evidence that pension funds and other institutional investors are currently disenchanted with the stock market, I feel their self-denial will not last much longer. And their return would have quite a dramatic impact on share prices.

Despite the stock market's lacklustre display, the portfolio has made headway. Since the start of the year, I calculate its value has increased by some £9,000, with its profit now standing at around £39,000.

I am not planning any dramatic changes. Only two shares are in the red - Profile Media and Wyatt. There is no point in selling Profile Media. Any such action should have been taken a long time ago. With the portfolio's biggest ever loss already booked, I may as well sit in there, waiting for the expected recovery. Wyatt is a highly speculative play that, I hope, will eventually produce a handsome return.

Glisten, the ambitious confectionery group, is the only constituent creating uncertainty. The shares were nudging 300p now they have slithered and slipped with little resistance to 239.5p. I like the company and its management, but it seems that some shareholders have been snatching profits. Many of them clambered aboard when the shares were floated two years ago at 80p. So the temptation to unload at least some of their holding must be irresistible. I believe the selling should soon dry up, but if it does not I will be forced to lock in what would be a considerable profit. I have decided to stick a 220p selling price on the shares. I do so reluctantly. But if the shares do not pull out of their slide there is a danger that the selling could snowball as shareholders try to prevent all their winnings melting completely.

I am continuing the search for recruits. With only 14 constituents I feel the portfolio is a little light. At one time it stretched to 16, a level I would like to reach again. It would be nice to bring in another Footsie constituent and I am wondering about Rentokil.

My two Footsie shares have experienced mixed fortunes. Allied Domecq has moved ahead, seemingly without a care in the world. Despite the weak US dollar it seems to be trading quite well and is also enjoying the influence of take-over speculation, with Bacardi and Pernod Ricard seen as possible partners. Clearly more deals are likely as the global wine and spirit industries consolidate and Allied seems assured of a place at any merger table. On the other hand Scottish & Newcastle has struggled. Britain's remaining major brewer is reorganising, but the rewards are not yet apparent. Here again the prospect of takeover action is strong.

However, it is on the undercard that the portfolio has enjoyed much of its success and my next addition may be another smallcap. I am looking at a share priced at less than 0.5p. That is a story for another day.