Private Investor: Hold on tight: it's going to be a bumpy ride

It's nice to know you're not alone. Quite a few readers have e-mailed me about last week's column, in which I was berating BAA's management for rolling over to the Ferrovial bid and castigating the authorities for allowing a Spanish-based company to buy into our airports when there is no reciprocal arrangement in place for British firms to buy the profitable chunks of Spain's public transport infrastructure.

I know I'm only a tiny shareholder in the company but, like thousands of others who bought in at privatisation in 1988 and since, I am effectively being forced out of the company I own (well, own a little bit of). The fact that we're all making some sort of profit on the deal doesn't really matter. What is important is that we will be missing out on years of growth in the future. The question is worth restating: if Spanish and Australian managers and investors can make the most of BAA's superb assets, then why can't their British counterparts?

I'm still a bit suspicious about why the BAA management caved in so easily. Was it because Ferrovial was offering them such a good deal personally? Was it because they simply lacked imagination and the will to fight? Or was it just that the pension funds were happy to take the money and run? As the late, great columnist John Junor used to write: I do not know, but I think we should be told.

At least the Ferrovial bid underpinned the BAA share price in these turbulent times. Last Tuesday some £25bn was wiped off the market value of the FTSE 100 Index's constituent companies. The Footsie closed 101 points down, or 1.8 per cent, its lowest since last December.

I can't reveal how much was wiped off my own portfolio, but it was less than £25bn. So now all the e (paper) gains I've been sitting on this year have dissipated. The few stocks that have held up in my portfolio - BAA and Savills, the estate agents' - have been more than offset by the funds and shares that have done disproportionately badly. It's a long list but I have been especially disappointed to see my money in the JPMF Indian Investment Trust drop by a quarter and my other Pacific and emerging markets-based trusts, such as Witan, collapse by similar amounts.

Well, I'm not fazed. These zones can be notoriously volatile. In retrospect, I might have taken a few profits in the Indian trust because it has gone up by such phenomenal amounts - about sixfold since I started putting in a few pounds a month in 1998. However, as I always say, I don't trust myself to get market movements right and I hold fast to the old idea of investing modest amounts regularly and not being distracted by the ups and downs of the markets.

Nonetheless the recent falls open up the opportunity of a little bargain hunting. Trouble is, most of the mining and oil stocks still look fairly expensive, and I doubt they'll go back to sane levels until the Chinese economy stumbles, as sooner or later it must.

A happier hunting-ground is those stocks that have excellent long-term prospects but which are temporarily regarded as "high risk". One in particular has caught my eye, and that's ARM, which I bought into during the last downturn in tech stocks.

It did well until quite recently, peaking at 141p. Now it's down to 105p. The problem, apparently, is the dollar, and its recent weakness. Arm's revenues are 95 per cent dollar-denominated, reflecting the industry standard, but 55 per cent of its cost-base is in sterling - leaving it highly exposed to the dollar/sterling rate fluctuations.

On the other hand, its chief executive Warren East and chief financial officer Tim Score have been picking up stock and I'm inclined to follow suit. Currency fluctuations usually wash out over the long term and that's what I'm looking to, so I've followed the directors and bought more shares. Needs a steady nerve, though.

s.ogrady@independent.co.uk