No Pain, No Gain: High-tech Clarity comes with fresh minds

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The Independent Online

High-tech shares usually leave me cold. I find much of the industry incomprehensible and have difficulty making investment judgements. To add to my discomfort I have suffered some unrewarding experiences.

Even so, I am intrigued by little Clarity Commerce Solutions, an old-timer in the IT game. And I believe the No Pain, No Gain portfolio could benefit from recruiting a company that is clearly on the road to recovery.I have enlisted the shares at 29.5p.

It is the first time I have put a toe in the stockmarket water since the summer, when the Whitbread hospitality group was taken on board.

Trying to ascertain whether shares have hit their low point is quite impossible. No bells ring. So the best any investor can hope for is to buy somewhere near the turn. My guess is that a significant recovery will occur this year. Only time will tell if it is already under way.

Clarity is one of a number of shares under scrutiny. Its inclusion will lift the portfolio's strength to a round dozen. I hope in the next few months to rebuild the portfolio's strength to 15 or 16 constituents, a level I regard as ideal for a buy and hold investor.

The software group offers a range of programmes, such as point-of-sale and loyalty tracking, largely aimed at the hospitality, leisure, retailing and ticketing sectors. Its 7,000 customers include 1,200 cinemas, 1,500 pubs and 640 retailers spread over more than 20 countries. In the past few months a string of significant contracts has been captured and more could be on the horizon.

Like so many, Clarity fell on hard times. But it was not the recession that prompted its difficulties. During its nine years on AIM the share topped 200p. They subsequently slumped to 12p. New management and a 1.8m cash call rescued the group from what looked like an increasingly mundane existence. Clarity's rebirth was not achieved without animosity. Rebels, led by serial investor Bob Morton, were forced to battle hard to gain control. His interests underwrote the cash call and he has since added to his stake and now accounts for 18.2 per cent of the capital.

Morton, who has a string of smallcap investments, is a former Clarity chairman. He and his supporters became bitterly disenchanted with the software group's performance. Among those who departed around the time of the confrontation were chairman Tim Bittleston and founder and chief executive Graham York.

The company, with experienced Ken Smith now chief executive, seems an ideal candidate for my little share exercise. I was waiting until a rumoured trading statement materialised before alighting on the shares. It appeared on Tuesday. Although underlining that trading was tough, the update adopted an extremely positive tone. There are hopes that in the year just ended Clarity will achieve profits approaching 1m, against an 8.6m loss. Tuesday's comments did nothing to undermine such bullish thinking.

Other possible recruits still in my sights include HealthCare Locums and Marstons. Both have moved against the trend and made progress this year.

My hesitancy has cost money. I realise I am now in danger of missing the boat. Still the two shares remain in the bargain basement and in these (still) difficult times it is surely realistic for a buy-and-hold investor to exercise extreme caution.

HCL, a health and social care recruiter, is the creation of ex-nurse Kate Bleasdale. She is the driving force and deputy chairman. It arrived in AIM towards the end of 2005 at 55p a share. The price now nudges 150p. It has a remarkable profits record, producing 18m last year (up from 11.8m). Some think it could hit 31m this year.

Like many health groups, HCL is benefiting from the increasing needs of the world's ageing population and the growth of outsourcing.

Marstons is one of the stockmarket's three remaining pub owners brewing their own beer. There is no doubt that in the booze business producing, wholesaling and retailing is the more realistic approach in an industry that was under pressure even before recessionary influences appeared.

Last week Marstons rolled out a relatively cheerful trading statement. Its shares are still on an undemanding rating and offer a fairly safe dividend yield of 8.7 per cent.

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