No Pain, No Gain: City of London Group wakes from a long slumber

The most erratic constituent to feature in the No Pain, No Gain portfolio has suddenly, after a period of somnolence, woken up. Shares of City of London Group, an investment and public relations business that once aspired to online greatness, have more than doubled on chairman John Greenhalgh's plan to venture into sophisticated financial activities such as hedge funds.

The price touched 140p recently but "take profits" advice left it at around 114p. For a year or so, the shares had hovered near 60p.

This latest round of excitement is a far cry from CofL's earlier brush with stock-market fame. In those madcap days at the turn of the millennium, when any company with just a hint of internet ambitions caught the imagination of countless investors, the shares fleetingly topped 900p. Then came the collapse as the group's online hopes, like those of so many others, disappeared. The burn-out took the shares to 35p.

To my regret, I failed to take advantage of CofL's stratospheric performance which, with hindsight, represented ridiculous valuations. I actually sold at a loss. Still, the internet hysteria defied logic.

Earlier, for a decade or so, CofL had existed as a rather subdued group. It tried to extend its financial public relations division but eventually settled for a modest operation largely devoted to mining companies. Its share portfolio became its major occupation. But then the internet swept away any inhibitions and CofL emerged - briefly - as another high flyer.

It had three online interests. None hit the jackpot. Two were mothballed, and the other was sold to a US group for about £1.5m in instalments. The group had to absorb heavy losses. It has, however, struggled manfully with the consequences of its exuberance and successfully re-established itself, thanks to its little PR side and its portfolio, worth some £5m.

CofL is even returning to the dividend list with an interim payment. Half-year pre-tax profit was £218,000. And Greenhalgh is confident about prospects.

But it's the financial move that has captured investors' imagination and revitalised the shares. CofL, capitalised at £11m, has elected to recharge a dormant subsidiary, turning it into a money operation.

An experienced financial team, headed by Nitin Parekh, former global investment chief of the Credit Suisse private banking side, has been recruited. A share issue is raising almost £500,000 and FSA authorisation has been requested. These moves follow other changes, such as the founder Greenhalgh, a former Fleet Street hack, reducing his controlling stake, although he retains a significant share presence.

CofL's latest adventure demonstrates Greenhalgh's determination to get the group on the high road. He moved to the internet when the hi-tech world was sending hundreds of shares into a frenzy of unsustainable excitement. Then reality arrived. I hope he has better luck this time, but he is embarking on an area that is already highly fashionable. And fashions change.

I doubt if I will re-recruit CofL to the portfolio. But there will soon be a couple of vacancies, so I could be tempted. One 2006 addition, IDN Telecom, is the subject of an agreed cash takeover bid and Georgica seems destined to manoeuvre its own departure.

IDN only arrived in July. Redstone, a larger telecoms player, is offering 2.939p a share, pricing the group at £11.8m, representing a modest portfolio profit of £2,000. The offer was accompanied by IDN's year's profit - £986,000. I expected £1.3m.

Georgica, having so far failed to attract an acceptable takeover bid, is planning the splits. Its tenpin bowling and snooker operations will demerge into separate companies. Such a break-up presents a problem. Each investment represents a £5,000 outlay, and under club rules I have either to top up or sell out. My current thinking is that I will dump the shares before the break-up. After all, I am showing a profit.

Last time I faced such a dilemma was when the remnants of the old Bass brewing empire were split into InterContinental Hotels and pub chain Mitchells & Butlers. I sold out, collecting a reasonable profit. But the offsprings of what was once Britain's largest and most famous brewer have haunted me ever since. The two shares have achieved spectacular progress - leaving the portfolio dreaming of what might have been.