No Pain No Gain: We need another mythical conspiracy by the Pru to buy the market out of its deep decline

After shares suffered brutal humiliation last year, on present form they seem set for another deeply wounding 12 months. The first month of 2003 has been horrendous, and investors can be forgiven for giving way to utter despair.

In today's grim atmosphere the noble art of picking winners is in danger of disappearing. But many are still prepared to try. And some are still doing well. One is Arthur Johnson, a Leicester-based investor who has achieved a considerable reputation for alighting on rewarding smaller companies. True, his 2002 selections suffered a loss. But a mere 1.8 per cent decline represents a splendid performance when compared with the 50 per cent-plus retreats endured by many.

The success of Mr Johnson's 2003 portfolio – as well as my no pain, no gain selection – must to a degree depend on the behaviour of the stock market. It is possible to buck the general trend to some extent, but exceedingly difficult for any portfolio to ignore the performance of shares as a whole.

His latest selections are: James Beattie; BPB; Brit Insurance Holdings; Devro; Dowding & Mills; Ensor; Great Portland; Maelor; RMC; S&U; Scottish & Newcastle; and Stylo. A mixed bag focusing on high dividend yields, recovery hopes, solid trading and take-over possibilities. An avid student of the stock market, and a frequent presence at company annual meetings, he spends some of his time lecturing on shares at a couple of colleges in the Leicester area.

Mr Johnson underlines his investment dedication with his occasional newsletter, the Kelmarsh report. His latest missive ends: "Do not despair; there are still opportunities around." I believe him.

The last long bear run was in the Seventies. Mr Johnson and I were around as, day after day, week after week, the stock market slipped. "Capitalism was finished" was the popular refrain. Gold, as is customary at times of strain, was in great demand with at least one entrepreneur offering golden lavatory seats as the ideal investment.

In two years the FT 30 share index, predecessor of the FTSE 100, fell from 520 to just over 150. Then, on the last day of 1974, Burmah Oil, a blue chip, had to turn to the Government for salvation. The index declined further, hitting 146 in the opening days of the New Year as rumours of problems at other major groups swirled. Popular mythology has it that the Prudential insurance giant then took a hand. It invited fund managers to its Holborn headquarters and a buy, buy, buy strategy was hatched. Collectively, it was agreed to invest some £20m, perhaps £250m by today's standards.

It worked. The sight – or mere presence – of the Pru and friends in the market reversed the long decline. Suddenly, the cult of the equity was fashionable again. By the end of the year the index was approaching 400. That index is still calculated, and this week it was 1474.

The Pru story has never been confirmed. Like so many in those days of soaring interest rates, crashing property values, stratospheric oil prices and a three-day week, I believe the yarn may have been embellished but it contains more than the odd grain of truth.

Another interesting point is that those fund managers who moved so bravely into the stock market 28 years ago are reaping rich rewards, if they still have the shares they bought. After all, the FT 30 index, admittedly less representative than today's Footsie, has made considerable progress since the Burmah disaster. In the Seventies debacle, insurance companies did not, as they seem to today, ditch shares to maintain their solvency margins although Commercial Union, now part of Aviva, had to launch a rescue rights issue. And there was no panic over pensions.

Perhaps I am being simplistic to expect the Pru, or anyone else, to mount such a fight-back in these tense, bleak days. I suspect the insurer does not now enjoy the power it did in 1975. So any call to arms might be ignored. There is also the possibility it has been hit too hard by the share slump to feel able to lead an attack on stock-market gloom.

I cannot help wondering if the vast raft of strangulating regulations that now haunt the stock market would destroy any attempt to call rivals in-house and discuss a concerted share-buying plan. Such action would, in the hawk-like eyes of the Financial Services Authority, probably be regarded as illegal collusion.

Still, I reckon if the FSA, or any of its cronies, tried to block 1975-style action by the fund management industry it would feel the heat as disgruntled investors, big and small, beat a path to its expensive Canary Wharf offices.

So perhaps the City's army of fund managers should get together; any repeat performance would be as welcome now as it was in 1975.