No Pain, No Gain: There may still be brass where there's muck

Hargreaves Services has not been an inspirational addition to the No Pain, No Gain portfolio. Like too many of my other recent recruits, its shares have lost their lustre, although I was, for a time this week, back in the money.

Takeover activity and a satisfactory profit performance provided fuel for a mini-revival which took the price from around 350p to a little above the 417p the portfolio splashed out in April. The shares then fell to 402p.

Profits more than doubled to £5.5m. Even so, when I alighted on the shares, the stock market was looking for around £6.6m. Stockbroker Brewin Dolphin expects some £8.4m this year.

There is little doubt Hargreaves remains an intriguing proposition. And I am happy to stick with the group which imports and transports coal, produces coke and carries various loads around the country. It has underlined its confidence with a maiden dividend of 5p a share - rather more than the token payment so many up-and-coming companies offer.

When I descended on Hargreaves, I described it as an unglamorous company. It will, I hope, support the accuracy of that old proverb "Where there's muck, there's brass". The shares arrived on the Alternative Investment market (AIM) last year. Since then, the group has added to its strength by putting through three takeovers. By all accounts, it remains highly acquisitive and is considering venturing into the German coal industry.

Hargreaves shares are not cheap. They are selling at around 16.5 times projected earnings. Still, when the portfolio got round to buying, I realised it faced a long haul. My mistake was not moving in more quickly. Indeed, I compounded my error by dillying and dallying in the vain hope the price would come off the boil. Eventually it did - but not before the portfolio lashed out its £5,000.

Lighthouse, my last recruit, has also produced figures. It has achieved its first pre-tax profit - £112,000 before tax from turnover up 36 per cent at £20.5m. In the same six-month period last year it lost £142,000. The shares stand at 18.25p compared with the 17.5p the portfolio paid last month.

I remain hopeful that the group, one of the country's largest independent financial advisers and pension administrators, will book a £1.5m profit for the full year. Its interim performance is encouraging. Cash under its influence is approaching £4bn compared with £2.8bn. Some quoted IFAs have had a difficult time and chairman David Hickey makes it clear that Lighthouse will not become a "busy fool" by chasing unrewarding turnover.

La Tasca, the restaurant chain, bumps along below my 137.5p buying price. Yet the eating-out industry is doing exceedingly well. John Barnes, La Tasca's chairman, made it clear that trading in his outlets suffered because of the World Cup football feast, but trading had since recovered to expected levels. Still, the restaurant world may struggle to make up the lost sales.

Lighthouse, La Tasca and Hargreaves, reside on AIM. Eleven of the portfolio's 15 constituents are on the second market with another, Myhome International, the multi-franchise group, featured on the even more junior PlusMarkets (the old Ofex). It should, however, move to AIM in the next few months. The demotion of under-performing Rentokil Initial from the FTSE 100 share index to the runner-up FTSE 250 means brewer Scottish & Newcastle is now the portfolio's only Footsie stock.

Since its launch in 1999, the portfolio has been weighted towards smallcaps. But I don't think it has ever been quite so dependent on them as now. I'd like to recruit another Footsie constituent, if only to add a little ballast. But I would not be at all surprised if my next addition is another tiddler. They are much more exciting than heavyweights.

But I am reluctant to get involved with the foreign companies that now represent such a large chunk of AIM's capitalisation. Being based overseas, they can circumvent some AIM rules. And AIM seems willing to accommodate some questionable players. Exploration and mining shares look most dangerous.

I am dubious about the merits of small resource stocks, wherever based. Ex-stockbroker Robin Boyle, who runs the successful smallcap (and AIM-traded) Athelney investment trust, complains they "frighten the living daylights" out of him. Me, too.