Profits come with patience in the portfolio game

Shares of City of London, the investment and public relations group, have had their most volatile six months since the company arrived on the stock market a decade ago.

Shares of City of London, the investment and public relations group, have had their most volatile six months since the company arrived on the stock market a decade ago.

For most of the 10 years the price stuck below 100p. Then, as the hi-tech stampede strained reason, investors became aware of the group's investments in fledgling internet operations.

Suddenly City of London was no longer a boring old investment and PR company going nowhere fast. Overnight it became a new economy wonder stock, quickly soaring to 937.5p. Of course, the shares melted in the subsequent high-tech burnout. They are now down to 290p, which represents about a 190p gain for long-standing shareholders or, for anybody who moved in at the peak, a horrendous loss.

I'm afraid I had something to do with City of London's rollercoaster display. I tipped the shares at 117.5p, pointing out they offered the unusual combination of internet potential and, from its investment portfolio and PR side, profits and dividends.

The ultra-smart investor would have sold at the top. Certainly, when the price was around its high point there was a strong case for taking some profits, leaving the residue of the stake cost-free. But bells do not ring to indicate peaks or, indeed, troughs and I suspect many investors who moved after my recommendation are still sitting on the shares.

If they are, I suggest they continue to do so. The recent modest revival in hi-tech shares should not have come as a surprise. There are many potentially highly rewarding investments among the telecom and World Wide Web players. Unfortunately, there are also seemingly hopelessly over-hyped and still over-priced shares. I believe City of London is one of those to back.

Chairman John Greenhalgh, betraying his training as a successful Fleet Street hack, says in a statement with the yearly figures: "The emphasis has moved away for the moment from the core PR operating business serving the hard-pressed mining industry for the brave new world of the internet. We believe there will be many fallers in this Grand National of investments but our own 'naps' will get past the finishing post - and maybe in some style."

The group's profits, for an internet player, were outstanding. They were expected to be lower and came out at £707,000 before tax, against a re-stated £961,000. There was also a dividend - increased by 5 per cent.

City of London has twohi-tech investments, costing £400,000, and could be near to acquiring a third. It has an effective 49. 9 per cent stake in ECeurope.com, a business-to-business operation said to be the world's second-largest multi-trading hub. It gets 58,000 hits a month with an average 14p-minute stay and is starting to generate advertising income. The second is Rchive-it.com, an archiving venture. City of London has an effective 40 per cent stake.

There is no cash shortage. The group raised £2.5m in March, placing shares with institutions at 635p. It also has investments valued at more than £9.25m; quoted internet investments account for less than £50,000 of the portfolio.

The two internet companies are expected to have a £1.4m burn rate this year although City of London's exposure is less than half.

I am happy City of London is a constituent of the no pain, no gain portfolio. I regret not taking profits but I see no point in selling now to grab a profit of 180p a share. But I must reiterate that old market saying - it is never wrong to take a profit.

Safeway is another portfolio share I am content to stay with. It was tipped in April last year at 248.5p and has since been down to 154.75p. But patience is a necessary investment virtue and the shares are now within a few pence of my buying price.

It is the best supermarket buy around with the new chief executive Carlos Criado-Perez giving the other big guns a run for their money. The shares are 13 times forecast earnings against Tesco's 19 rating. And there is still the chance of a takeover bid.

Finally I am delighted to see Ring, a distributor, has come up trumps. Although the shares did not graduate to the no pain, no gain portfolio, I tipped them in September at 32p. Last week the company collected a 50p a share cash bid.