No Pain, No Gain: Thank goodness for the miners and oil producers

Despite some disastrous investments – principally the Food & Drink Group and Lennox – the No Pain, No Gain portfolio has displayed rather more aplomb than I had realised.

The star-studded display by Nighthawk Energy and one or two other more subdued but nevertheless resilient performances have helped nullify the impact of my best-forgotten investment forays.

However, the portfolio is looking a little light – down to just 10 constituents following three recent departures and only one addition. My favoured strength is 15, even 16. I hope to enlist recruits over the next few months but although there are apparent bargains around it is wise to display caution in the treacherous conditions now prevailing in the stock market. After all, it is mortifying to descend on a share that is on a low rating and looks an absolute bargain only for it to be even cheaper tomorrow.

The credit crisis, the creation of greedy bankers, is far from over. It is distressing the housing market, which will have far-reaching consequences. A slowing economy has also to contend with uncomfortable inflation as evidenced by the soaring cost of food and fuel.

It is difficult to see shares, with the possible exceptions of miners and oil producers, making much headway. Indeed recent talk that the bear market is over is, I feel, premature. It is only the strength of mining and oil shares, which have more than compensated for despair in other sectors such as banking and retailing, that have given Footsie a respectable, yet in some ways deceptive, appearance.

Most portfolio constituents are microcaps, a friendless category since last summer. The lower reaches of the stock market are always more risky than the blue chip highlands. But, with dedication and a little luck, the undercard in recent years has provided some rich rewards. But the credit crunch and deteriorating economic outlook have prompted many investors to abandon what they regard as a far too risky environment in favour of safer havens. Consequently many smallcaps have suffered a brutal mauling.

Before the bottom fell out of the undercard, the portfolio had achieved a £143,000 gain. It has since been whittled away and at the time of my last calculation – in March – "winnings" were down to £91,000. A modest improvement since then has lifted the profit to around £95,000.

Scottish & Newcastle is the most significant departure. The old established group has been broken up with successful bidders Carlsberg and Heineken sharing the spoils. The shares were the longest serving constituent, joining in July, 1999. The portfolio paid 394p; the take out price was 800p. I remain convinced that Scottish was worth more. Indeed, the ferment embracing the world's big three brewers, InBev, SABMiller and Anheuser-Busch, is likely to illustrate that Scottish represented a bargain for its captors.

The intense institutional pressure on Scottish to surrender its independence was yet another example of the City being anxious to grab easy cash but losing sight of the bigger, more profitable horizon.

Of the remaining 10 constituents, half are in the black with five in the doldrums or hovering around break even level. Rentokil Initial, the only blue chip now in my collection, is one of my losers. Still, new management offers hope of better times, although the company faces a long, hard slog before it can hope to recapture the glory days that prevailed during much of Sir Clive Thompson's reign.

Nighthawk Energy, as befits an oil and gas explorer and producer, is my new star. The latest development is the start of pilot production at its highly promising Devon oilfield in Kansas. It is its second US venture to achieve production status. Hargreaves Services, also deeply involved in the fuel business, has also managed an encouraging display. Printing.com's annual figures are due on Monday, and Lighthouse turned in reasonable performances.

Printing.com, offering small print services, could produce profits approaching £2.5m. Lighthouse, involved in wealth management and financial advice, has just acquired another money firm, Sumus. It now embraces the country's largest independent chain of financial advisers although it remains a smallcap with a value of around the £16.5m mark.

English Wines Group, the Chapel Down producer, has moved into profit although such an achievement has, not surprisingly, failed to influence its already highly rated shares. Like so many other groups relying on the big spending British public, the portfolio's only Plus-quoted share has felt the impact of belt tightening worries. Growth Equities & Company Research expects profits to grow from £86,000 to £200,000 this year.