Investment: No Pain, No Gain: Our Man's Portfolio: Little 'uns show big returns

AFTER SEVEN months the no pain, no gain portfolio is comfortably in profit with 11 of the 14 constituents recording gains - some of them quite spectacular - and the three laggards suffering only modest reverses.

Allied Domecq, the Montana restaurant chain and the leisure group Springwood have achieved the most eye-catching performances.

The complicated Allied pubs sale to Punch Taverns is still going through and it is not yet clear whether the portfolio will be able to achieve an all-cash result. Under the mix and match offer, Allied shareholders may end up with some Bass shares, even if they opt for all cash.

A service for selling any unwanted Bass stock is being established and small shareholders, such as the no pain, no gain portfolio, could end up with such a small parcel of shares that it would be wise to take advantage of the facility with its 0.2 per cent commission charge.

Montana is also the subject of corporate action, being taken over by AIM-listed Hartford. I have decided for the time being at least to stay with the enlarged group, being run by Montana's creator Kevin Finch.

Since I descended on Springwood, the leisure group run by Adam Page, the shares have attracted a strong following with, I believe, veteran tipster Jim Slater advocating their merits. The company was clearly undervalued in June at my 131.5p buying price. The shares were a complete steal in March when the price touched 64p.

Last month an upbeat Mr Page said interim profits had jumped from pounds 516,000 to approaching pounds 1.2m and indicated further expansion of his Zanzibar night club chain was underway.

Gowrings, the garage-to-fast-food group, is another to justify my faith, with a 22 per cent profits advance to pounds 491,000, and builder Galliford has chipped in with a robust 19 per cent year's profits increase to pounds 4.5m. They built almost 550 houses in the year and has sold 30 per cent of this year's forecast output of 625 homes. The group's land bank should run for three years and its average selling price should improve to just below pounds 100,000, thanks to inflation and a greater emphasis on more upmarket dwellings. With margins improving on the construction side there are hopes profits will stretch to pounds 6m this year.

Of the others which have hit the up road Anglo Pacific, after encouraging noises, remains an intriguing proposition, and retailer Era has moved ahead after a significant seller was mopped up. Although it will report its traditional interim loss, prospects for the full year continue to improve. The three laggards - City of London, Merrydown, and S&U - although so far disappointing investments, are not creating concern. Regal Hotel still represents the portfolio's major casualty. Interim figures recently were pretty awful although not quite as bad as had been feared after June's profits warning. The company has put 36 of its 114 hotels on the market and hopes to pull in around pounds 70m. The shares are off their 18p low, reaching 22p. I tipped them at 29.5p in February; they were kicked out of the portfolio in July at 18.75p.

For anyone still hanging on, the hotel industry is still attracting considerable corporate activity and there remains a distinct possibility a bidder will take the company out of its misery. If Regal continues to soldier on as a stand-alone company, the planned restructuring of its hotel spread and a more focused and leaner approach by its management could make the shares a rewarding recovery stock. But there is not much chance they will again be checked into the no pain, no gain portfolio.

It is intriguing that the portfolio's only Footsie stock, Allied, has done well while its one mid-capper, the takeover-prone Safeway super- market chain, has just kept its trolley in front.

With the exception of Montana the rest of the pack lurk among the small caps. It has so far been a good year for the little 'uns with the all- small index riding at nearly an all-time high.

It could be argued the small cappers are merely making up for past weakness but with blue chips often looking stretched - although not when measured against the Dow Jones Average - more institutional investors are being forced to take a much closer interest in the shares lurking outside the top 350.