No Pain No Gain: Takeover action saves the day as star performers feel the pinch


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The Independent Online

It’s been an unrewarding three months for the no pain, no gain portfolio.

The general stock market malaise has taken its toll with some star performers feeling the pinch.

Special influences have also eroded returns. For example Booker, the cash and carry chain already under the cosh when my last quarterly review appeared, has suffered further humiliation and one or two other constituents seem to have fared more severely than overall conditions justify.

Still, there have been some bright spots, thanks to takeover action. Brightside, the insurance broker, disappeared into the maw of private equity at a reasonable profit, and the Spirit Pub Co’s shares have had a more cheerful time following the attentions of brewer Greene King.

The net result is the portfolio’s profit is a little over £1,000 lower but, far more importantly, the gain has drifted further away from its all-time near £150,000 profits peak.

As I write the benchmark Footsie index is below the level it started the year and hopes it will break its old record have almost evaporated. The array of profit warnings – with Tesco and De La Rue among the latest culprits – have impacted on sentiment. But some experts still cling to the notion that an outstanding final quarter could remedy Footsie’s problems while others maintain the index is heading for a dismal 4,000 points.

The stock market has a nasty habit of confounding all and sundry. Lower share prices often provoke predators, which can encourage sentiment. The Spirit situation is an example. The shares earlier this year were around 86p but as the stock market faltered they retreated to 70p before rallying a little. Then along came the acquisitive Greene King. It is reported to have offered a rejected 100p a share and then 110p, also given the cold shoulder. Many expect it to have to dig deeper – perhaps more than 120p.

Spirit would be a marvellous catch with its successful pub/restaurants which include the Chef & Brewer chain and I would expect a victorious Greene King to sell many of Spirit’s leased drink-led pubs. There is  alk of rival bids, with pub group Mitchells & Butlers hot favourite.

Takeover action is almost certainly looming at Avation, the aircraft leaser. It has in double quick time built its stake in AIM-traded Capital Leasing Aviation from around 65 per cent to 95.2 per cent. Surely Avation will be obliged to mop up the few outstanding shares? After all, such a tiny minority in a quoted company is highly unusual.

CPA is very much in the same line of business as Avation and the two share a chairman, Jeff Chatfield. Some months ago I said Avation would make CPA a fully-owned offshoot and there now seems little point in maintaining the expensive share quote unless, of course, Mr Chatfield plans to use CPA as a bid vehicle.

Now to Findel, the home shopping group. I am disappointed in the way the shares have performed recently and have decided to lock in what profit is left. The shares were above 320p – a 12-month peak - but have since been in ragged retreat. I have booked the sale at the quarterly report price of 236.75p, recording a much reduced profit.

Otherwise, I am relatively happy with the portfolio, with the exception of SnackTime and TEG. I still hope TEG, an environmental group, will emerge a winner but I have given up on SnackTime. The value of the portfolio’s stake is almost non-existent and the shares have now been suspended. I will discuss the company’s role next week.

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