Into every portfolio a little sparkle must fall.
Into every portfolio a little sparkle must fall. Or, to put it another way, for every huge great transnational business you have a stake in, you ought to think about something much smaller in the same sector to balance it. (That is if you think you really ought to be in that sector).
The logic is pretty obvious, I suppose. Larger, more mature businesses tend to have one set of strengths; smaller, younger companies with tiny market capitalisations tend to be better at other things.
For example, I have been a happy eater at McDonald's for some time, and, yes, I know that you can see the terrible physical consequences of that in my by-line photo. I also own shares in the company.
I have to admit that every time I read an article by some know nothing Dave Spart-type droning on about villainous companies I am moved to buy into them, for two reasons. First, that the stories about them are usually proved wrong on the slightest scrutiny and, second, because they are usually very good at making money, and it is that that really annoys the anti-globalisation movement.
I haven't got around to buying BAE Systems yet, for example, but I shall soon. Every time I see some absurd public school educated son of the ruling classes trashing a hapless branch of McDonald's, whose franchisees and staff have to work hard for their living, I want to add to my holding in McDonald's. It is a sort of pro capitalist protest, a McProtest if you will.
In the 1980s Peter Cook tried to organise a "pro monetarist" march from the Stock Exchange to Trafalgar Square, a clever little joke, but I think I have found the best way to defy the far left.
We haven't seen many of those sorts of demos lately though, so I have found myself free to invest in a much smaller burger chain, and thus balance my investment in a huge burger chain, through a company called Urban Dining (bought at 69p).
This was, until last week, a cash shell set up by the former Pizza Express directors Glen Tomlinson and John Metcalf, to acquire and run restaurant groups. It has bought Tootsies, a 23 strong chain of restaurants for £31m. Urban Dining has cleared its debts and has ambitious plans to roll out the Tootsies format nationally and acquire more promising formats.
Now this is a punt. The track record of the top management is well known, but that in itself doesn't guarantee success. Burgers are always prone to health scares and an outbreak of some bovine disease or other. Against that, it has to be said, the buying public don't seem to be too frightened by BSE now.
Tootsies should also benefit from the long-term trend towards eating out and from a drift of customers, as they become older and more affluent, from the likes of Burger King and McDonald's. I did reasonably well out of a previous similar investment in the pizza chain Ask Central, but that was sadly taken private and I was bought out. I now have another potentially strong growth story from that sector, and I fully realise the risks involved - as I say, it's a punt.
As are most investments in the highly speculative world of small oil and mining companies. Such enterprises have always had a certain adventurous air to them and the unwary have lost, and occasionally made, fortunes from them. It is an area where rumours and gossip seem to be an unusually strong driver of the share price.
I have avoided these in the past, preferring to buy Shell instead, although that has mostly been a disappointing investment. Even with the price of oil at $50 a barrel it hasn't really taken off. So I have had my head turned by another small cap, the recently floated Falkland Oil and Gas (bought at 56p).
I am more than happy to admit that I haven't a clue as to whether there is any oil and gas under those troubled islands, and if there was there is probably no way we could stop the Argentinians from grabbing it, given the state of the Royal Navy. But you never know. The thrill of being tossed around on the waves of speculation crashing in from the South Atlantic will be fun. Sooner or later it's bound to spike upwards. Isn't it? Maybe I'll start a rumour.Reuse content