Private Investor: While the punters are away, it's time for a summer play
Saturday 14 August 2004
Anice light summer dalliance with a real mover is what I really fancy.
Anice light summer dalliance with a real mover is what I really fancy. Looking back over the market movers in the last few months, it seems to me that it has been the riskiest stocks that have been the most rewarding. Most of the rest have been dull.
Stuck in London for the summer, I think I have spotted how I could have some fun. August has emptied the market of backers of many small, speculative stocks. They have taken their dark glasses off to Monaco or Marbella, leaving their stories to wilt and the shares to wane from neglect.
Now is the time for bargain hunters to pounce - but only on companies with real attractions. There should be assets on the balance sheet (preferably cash) and they should be inexpensive to run (penny stocks for choice). But most important, the shares should look sure of recapturing their mentors' interest and former high ground when the holidays are over. After all, I only want a short-term summer punt.
Some of the speculative so-called shell companies look ideal picks. Though reduced, the City is not so empty that it is impossible to find an expert with a list of such busted companies, shorn of their operations but still with value. While not the rage they were in the dot.com boom, these have been coming back into fashion. They are still one of the easiest shortcuts to a stock market quote for a private company that can buy control of them.
So I now have a list of shell possibilities, attractively set up, mainly on the Alternative Investment Market (AIM), with racy stories and some money to spend. One is Chaco Resources, a newly funded penny shell with ambitions on oil and gas in Paraguay. Another is Gaming Insight, from the self-styled shell-wallah Haresh Kanabar's stable. This has been emptied of its former greyhound racing broadcasting operations, and returned to AIM to seek acquisitions.
Aurum Mining is being pushed my way, although it is a bit above my budget at over 100p. But the gold run seems set to continue, and this cash shell plans to invest in mines in the resource-rich former Soviet Union.
Otherwise, tech stocks, right down in bargain basement territory, are surely a must. At a mere 1.5p I am looking at Cybit, whose software enables businesses to track their car fleets. Yet it has just announced a strong order book plus backing from Norwich Union Insurance in the form of a three-year strategic partnership to implement its software.
Oil cannot be left out and I have found one whose regular followers seem to have gone away, or tired of waiting. Desire Petroleum is exploring in the Falkland Islands. Its price went to 37p a few weeks ago on news that it had completed seismic studies. But since then the shares have drifted. Or I could go back to my shell list, where the recently floated oil investment company Ragusa Petroleum looks risky enough. It is rumoured to be closing a first deal.
But maybe these are a bit too racy. I am counselled by my sage broking friend, Murray Liddell at Redmayne Bentley, that it is not wise to be too frivolous, as that is the road to ruin. Take a punt if you must, is his view, but do it on shares that will pay dividends. More expensive, maybe, but not in the long run. And they will not cause worries when it is my turn to go on holiday. He suggests running with the cigarette group Gallagher: after all, whatever nanny-state pressures are deterring smokers here, the developing world smokes like a chimney. It's a frequent bid candidate story.
Another is Standard Chartered Bank, as a punt on the booming Asian economies. Land Securities is possible, because it looks to gain most from the new Property Investment Funds, based on the US Real Estate Investment Trusts, proposed by the Government.
Then there is GUS, because sooner or later the mega-retailer's Argos and Homebase empire will be broken up. Or BOC, as a beneficiary from IT recovery, because its gases are used to create the ideal environment for chip manufacture.
I'll go for a mix of prudence and frivolity: I can't be doing with too many sleepless nights.
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