Derek Pain: This is not the time for small investors to sell

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The Independent Online

The no pain, no gain portfolio has, perhaps not surprisingly, taken a hit since my last column in July. The stock market has been in ragged retreat through the summer, and last week's infamy in New York and Washington has unsettled investors, big and small, with perhaps a traumatic long-term impact.

The no pain, no gain portfolio has, perhaps not surprisingly, taken a hit since my last column in July. The stock market has been in ragged retreat through the summer, and last week's infamy in New York and Washington has unsettled investors, big and small, with perhaps a traumatic long-term impact.

At the time of writing, the portfolio of 16 shares is recording 10 gains, some substantial, with six constituents in the red.

It is impossible at this stage to offer a realistic prediction about the stock market's performance. There have been indications of "official support" which is likely to continue. But many past disasters have not had the huge, long-term negative impact many expected. Yet last week's atrocities do take us into uncharted territory, with much of the devastation at the very heart of the US financial system. There is clearly a danger the world could be tipped into deep recession although I believe there is more chance, after initial setbacks, of the economy actually emerging stronger.

What is blindingly obvious is that this is not the time for small shareholders to rush to sell their shares at any price. Unless they need the cash they should sit tight. Those enjoying big profits may be tempted to, say, sell half their shareholding, leaving them with low, even nil, cost investments. But such a policy is not related to today's conditions: it is one I have advocated for a long while.

The major institutional players are not being panicked into selling. They are encamped for the long term. Most may be sitting on their hands but I bet a few are taking the opportunity to gently top up their holdings.

The stock market, to my mind, had been looking exceptionally cheap. Indeed, there seemed every chance the slide could be nearing the end and shares were shaping up to turn in a much more positive performance in the closing months of this year. The British economy seemed relatively strong and could have withstood the more damaging influences of any worldwide downturn. And mild recessions are not necessarily bad for shares. But the transatlantic horror takes us into a whole new ball game. Nothing like it has happened before. But I feel falls will be relatively modest and trading will settle down with prices firming quickly. I have every hope share prices will end the year near their present levels.

I am reasonably content with the shape of the portfolio. During the weeks in cold storage some constituents slipped from profit into loss. City of London, the public relations group with internet ambitions, is one; Stagecoach and Springwood have also taken the same route.

Actually, most constituents have made positive contributions on the trading front. Burtonwood Brewery, Inter-Link Foods and Mears are among them. Springwood has produced particularly encouraging figures. The discotheque chain rolled out the sort of half-year profits I would have expected, in more normal conditions, to send its shares dancing merrily higher. Instead they have fallen as the stock market has worried about the recent acquisition of smaller rival Kingfisher Leisure. Half-year profits, before exceptional items, jumped nearly 44 per cent and, with Kingfisher absorbed, a figure of £4.7m seems likely for the full year, putting the shares in the bargain basement.

The nation appears to have fallen out of love with beefburgers so Global Group, a maker of burgers, is the one constituent causing anxiety. The shares have more than halved and I am inclined to drop them. But interim figures are due this month so I will postpone the old heave-ho.

The group does have other interests, although they are unlikely to produce enough to compensate for problems on the meat side.

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