Small Talk: Totting up our winners and losers

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The Independent Online

As Christmas is rapidly approaching, this seems like a good time to review the Small Talk year. And on reflection, it is no exaggeration to say that we have played a blinder.

But we also ought to confess that we have got some stock picks dreadfully wrong. Such is life for any tipper, and making the right choices at the small cap end of the market is notoriously difficult. Our best calls have been on the downside. It is not fun predicting doom and gloom for companies. But companies and the market getting it wrong is as much a part of investing as looking for the next 20-bagger, and we believe that short selling, while not likely to win any popularity contests, is a legitimate method of making money from pricing anomalies and correcting mis-priced securities.

In March, we warned investors to steer well clear of ChoicesUK, the CD and DVD retail group, after a profit warning that came swiftly on the heels of a much more bullish update just weeks before. We said the company had a "gargantuan struggle" to avoid the same fate as SilverScreen and Music Zone, and so it proved. All three now rest in the graveyard of home entertainment retailers.

Two other high-profile disasters were less obvious. Erinaceous Group, which we highlighted at 110p, is now trading at below 5p. It has been a sorry tale of mismanagement, too much debt and directors who appeared to believe they were untouchable. If ever proof were needed that bricks and mortar is not a failsafe route to riches, Erinaceous provided it in spades.

Meanwhile, our call on Johnson Service Group could not have been timed better. We highlighted pot-ential problems at the dry cleaning group on 29 Oct-ober when the shares were 236p and the company obliged us with a disastrous warning just two days later. With the stock languishing below 50p, shareholders are praying for a private equity buyout but with the business showing no signs of improving and a debt pile worth five times as much as the equity, we believe that a bid at any premium is a very long shot.

Elsewhere, our reservations about other stocks were proved right Cape Diamonds, London & Bristol, Brinkley Mining and Pursuit Dynamics have all fallen sharply since we alerted readers to a variety of issues, from poorly handled initial public offerings to competition eroding margins, and technology that is showing no sign of commercial viability. Continue to avoid these stocks like the plague.

Our buy advice was more of a mixed bag. Akers Biosciences delivered on its promises at long last and the shares are almost 60 per cent better from the time of our first tip. There should be more to come in 2008.

Energetix and Zenergy Power, two alternative energy companies, have also been on strong runs since we tipped them.

So, to the dogs. Anyone taking our advice and buying shares in Worthington Nichols in July has been wiped out the shares are currently suspended and the outlook seems bleak. The entire board has been replaced, and a review of the company's position was expected last week. It released a trading statement at 5pm on Friday, disclosing a further 9.4m in writedowns added to the 6.5m previously revealed. While it has requested a resumption of trading on Monday, the announcement could knock the shares further.

Chromogenex and CMR Fuel Cells have halved since we tipped them in the summer. Finally, Cains, the Liverpool-based brewer, has been a long-term favourite of ours. On Friday, the company announced its first "Best of British" concept pub, and although the shares are sharply lower than when we first tipped the stock, we remain very bullish in the long term.

Date with destiny for ailing matchmaker

It might come as a surprise to readers to find that Dateline, the dating agency that used to advertise heavily in the national media, is still going strong. A surprise because there are literally hundreds of dating websites for lonely hearts to choose from nowadays without fear of seeing their grinning mugs plastered all over newspapers if they get lucky.

The company is owned by the media investment group Yoomedia, although it won't be for much longer. Friday's trading statement from Yoomedia included confirmation that it will sell Dateline. The word in the market is that the AIM-listed investment company Capital Ideas will be its new owners, leaving Yoomedia with nothing but cash.

Hopefully the Dateline name will live on in a world of text and speed dating, it is reassuring to know that a little nostalgia for pre-internet snail mail dating lives on, even if Dateline has itself embraced the World Wide Web.

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