Paper profits in a tough year

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The Independent Online
THANK goodness for TVS. Jason Nisse's share tip has rescued our 1992 staff investment portfolio from what many fund managers would regard as a poor performance. As it is, we have seen a net gain on our money of more than 30 per cent - and that's before taking account of any dividend income. Over the year, the FT-SE 100 share index rose just 14.2 per cent.

TVS proved an inspired tip. The company had just lost its franchise. At 7p, Mr Nisse said the company was either severely undervalued or insolvent. International Family Entertainment, Reverend Pat Robertson's cable TV group, decided the former was the case and made a bid that values TVS shares at 35p. The shares now stand at 30 1/2p, making them the second best performing share in the stock market last year after Brown & Jackson.

Takare shares, Terry Wilkinson's tip, fully justified the hopes placed in them with a rise of 30 per cent from 167p to 220p - or twice as fast as the stock market overall.

This low-cost, fast-expanding provider of long-term care for the elderly and chronically ill should have lifted earnings per share by at least 20 per cent in the year just ended.

Its efficient operation is well placed to cope with any changes introduced this spring in the way in which the Government makes provision for care of the elderly. The Takare growth story will undoubtedly continue.

Bass was the choice of our City Editor, Jeremy Warner, on the grounds that it was a well-managed FT-SE 100 share index stock with plenty of defensive qualities that would be attractive to investors if the recession persisted. It had also underperformed other shares over the previous year. The choice was a good one. Over the year, Bass rose by 27 per cent.

John Murray's Irish punt, Greencore, proved an interesting play that was saved by Britain's exit from the ERM. In local currency terms, the shares fell. But in sterling terms, they were well up, thanks to the pound's devaluation against European currencies, including the Irish punt, from September onwards.

Patrick Hosking did not like shares at all this time last year and therefore opted for an unusual mixture of investments. Five per cent of money went on a 'down-bet' on the FT-SE 100 index - a reckless punt that the stock market would fall in the first three months of the year. It did, but not before soaring so high that his bet was automatically closed out, losing him everything. The rest of his nest-egg went safely in the building society, so he ended the year fractionally ahead.

Chris Huhne also went for an option, and thankfully warned that the tip was more 'like a flutter on the Grand National than an investment'. The option was essentially a bet that the dollar would rise against the German mark through the year. Currency options are typically held for no more than three months, which is just as well since the dollar's rise in the first four months took the price up by more than 70 per cent to dollars 2,650. But the dollar gradually lost some of its gains, ending the year 10 pfennigs up on the start. Anyone who held the option until the Autumn would have lost their stake.

The moral? Don't bet on options what you cannot afford to lose. Buy options to trade, rather than hold. And sell after a good profit. Nobody ever went bust making half their money again in three months.

ICI seems to believe that demerging pharmaceuticals from bulk chemicals will add value for shareholders, but it did little to enhance our portfolio. The recession in bulk chemicals, now spreading across Europe, combined with an unexpectedly fast tail-off in sales of Tenormin following the loss of its US patent, meant the City quickly lost its enthusiasm for the demerger proposals. Most analysts expect it to be delayed until late this year at the earliest, and some say it must be accompanied by a dividend cut.

The performance of shares tipped last year by contributors to the Independent on Sunday business section has set a stiff test for this year's equally eccentric selection.

----------------------------------------------------------------- THE UPS AND DOWNS OF 1992 ----------------------------------------------------------------- Price p Price p Gain or at 1/1/92 at 31/12 fall (%) Jason Nisse TVS 7 30.5 +336 Terence Wilkinson Takare 167 220 +30 Jeremy Warner Bass 499 635 +27 John Murray Greencore 220 265 +21 Simon Pincombe Tesco 213 249 +16 John Shepherd Grand Met 440 465 +6 Patrick Hosking FTSE put/savings +2 Heather Connon ICI 1188 1059 -11 Roger Trapp Owners Abroad 107.5 96.5 -10 Christopher Huhne Currency option 1,537 dollars nil -100 FT-SE 100 2,493.1 2,846.5 +14.2 ----------------------------------------------------------------- Pounds 1,000 invested in each, total pounds 10,000 would today be worth pounds 13,171 -----------------------------------------------------------------

(Photograph omitted)