I've been getting cold feet this week about three of my punts. The trio of Falkland Oil and Gas, Matrix Communications and Sportingbet are all still in the money, just not as much as they were. Which, if any, am I going to sell?
It's a tough call, testing your nerves against the market when a share comes off a high and you start to fear that, very soon, you will be drifting gently into the red, at least on paper. It's a feeling of impending doom, as if you have missed your chance to sell, and the best you can do is to get out right now, before things get any worse. That's the sort of pure, natural, psychological reaction that small investors are supposed to try to gird themselves against.
That might be the right approach, though. All these shares are extremely modish. Falkland Oil and Gas has benefited from the mini-boom in small cap oil and natural resources exploration companies, a bubble that has begun to burst in recent weeks. This, presumably, is why Falkland Oil and Gas has been marked down so much in the past couple of weeks, now standing around the 100p mark from its peak of nearly 140p in March. I have to say that it has fared rather better than many of its peer group.
So, there's some concern there, but I am up 62 per cent on when I picked the shares, and I didn't put much in there, so I will hang on to those.
Matrix Communications, which I am also actually still in the money on, has fallen more and is looking much more precarious. There's been little news flow, apart from the fact that Investec Securities has been appointed broker to replace Daniel Stewart. I'm 10 per cent up here, but almost all the substantial gains that the shares registered since I bought in last autumn have unravelled. I can't find a good reason to hang on in there, even with the interims coming up on 1 June. I might just join the rush for the exit door.
The most intriguing of the trio is Sportingbet. That is the one, overblown as it may be, that actually does have a real business, albeit a rather frivolous one, in the form of online betting, such as poker games. It has lots and lots of advantages as an investment, and has a reasonable early-mover advantage, but the one thing that does worry me is the ease with which new entrants can come in and dilute the profitability of the established players.
Only this week, I notice that an outfit called World Gaming is the latest company to cash in on the internet gambling phenomenon and has listed on the Alternative Investment Market. World Gaming is actually a software company, and has a joint venture with my old friend Sportingbet. Could it be a contender for my money?
It raised £2.5m through a share placing at 52.5p a share and has a market capitalisation of about £20m. Profits before tax quadrupled over last year to £9.3m. The shares are modestly up on their debut, as I write, which suggests that they haven't set the City alight. Maybe that offers an opportunity. Perhaps I should wait for PartyGaming, the world's largest online poker company, which is based in Gibraltar and, apparently, will have a valuation of more than £5bn when it floats, as it promised to do last week.
Again, there seems to be a solid and attractive profit record; underlying profit before financial charges reached £210m last year - as with World Gaming, four times the level of 2003. Revenues made a similar fourfold jump.
Goodness me, I sound like a gambler now, don't I? Not content with one internet gambling firm, suddenly driven by greed, I want two or three or more.
But what if anyone can just go and buy World Gaming's software and set up a website? What if someone else produces some cheaper, better software? What if I decide that I ought to put my dough into something more sensible?
There is one gambling stock that I used to hold that I have always regretted selling, and that is William Hill. I'd bought in at the float and ditched it because it was just going too high and I was worried, however foolishly, about the tax side o f things. Bad move, as it just kept rising and rising. Now, though, I think I see a buying opportunity. The shares have been marked down after Hill's move to buy Stanley Leisure's chain of betting shops.
Now, the internet may well be the future, but there seem to be a lot of folk out there who prefer the traditional atmosphere of a betting shop to clicking away on a mouse. There's room for plenty of approaches to gambling in this vice-ridden world. I will be welcoming William Hill back to the portfolio shortly.Reuse content