Share Club: The nuts and bolts of success

Our regular series following the fortunes of the Reservoir Dogs share club, a London-based group of friends who meet every month to buy and manage a portfolio of shares.

Our debate about which new shares to buy was long and detailed (see box at the bottom of the page for more on our existing portfolio). Eventually we decided to buy into three new companies.

The first was engineer Transtec; our last investment in a cheap, good- value engineer was Jones and Shipman, which was almost immediately taken over, leaving us with a tidy gain.

Transtec (30.5p) is on a ridiculously low rating with a big dividend and a strong customer base. It has been growing in size fast and although it issued a profit warning last year, its directors have been buying the shares. Its founder may also be about to make a return: ever heard of Geoffrey Robertson, ex-Paymaster General and good friend of Peter Mandelson? He built up Transtec and would appear to have a bit more time on his hands now.

We also decided to buy a rather peculiar form of investment called warrants (see box below for more on this). Skye-Pharma is a fast-growing and well- respected biotech company about to make the hugely lucrative transition into a drugs company. A while ago it issued warrants that allowed holders to buy ordinary shares once they went over 40p. For this privilege you in effect pay 67.5p at current prices. You make big profits as soon as the ordinary share price goes above 107.5p (40p exercise price plus the cost of the warrant shares, 67.5p). As this option exists until well into 2001, you have a long time to wait for the share price to rise. If the share price doubles then you make a big, big profit.

We also like Savills - one of Britain's largest surveyors/ estate agents with a fast-growing financial services division. It is a well-run company with a great record of growth and some nice shareholdings in niche companies like stockbrokers Killik. It also pays a handy dividend and offers a real bet on lower interest rates kick-starting the property markets. We probably won't buy as long as the shares remain above 120p, but any fall below that price represents a buying opportunity.

One member advocated buying government securities - gilts - as a safe, secure home for our money. The idea of buying gilts is a way of expressing real fear about the safety of investing in shares. As the stock market hits record highs and the US markets shrug off fears about hi-tech wonder stocks, there seems to be no hint of panic. But we're still not sure. We have plenty of cash and will probably keep it that way. But the problem with keeping your money in cash is that interest rates are plummeting. The yields on gilts are also at all-time lows at around 4 per cent. Not exactly a get-rich formula there, either.

The interest may not be great but it sure beats a huge drop in share prices, so we are going to investigate gilts as a home for some of our cash.

The safest bet for the bulk of our investment seems to be to track down small and medium-sized companies which can afford to pay solid dividend yields above 5 per cent as well as building profits over a five-year term. Beware of companies which don't have enough profits to cover their dividends. Equally, look out for companies that have been badly dumped on by the City simply because they've had a small hiccup in profits. If the long- term record is good then it won't take much to return to long-term trend.

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
tech

Apple has been hit by complaints about the 1.1GB download

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
A 'Sir Alex Feguson' tattoo
football

PROMOTED VIDEO
Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Life and Style
Alexander McQueen A/W 2014
fashionPolitics aside, tartan is on-trend again this season
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Sport
Joel jumps over the board...and into a giant hole
footballFrom joy to despair in a matter of seconds
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Arts and Entertainment
The former Doctor Who actor is to play a vicar is search of a wife
film

Matt Smith is set to join cast of the Jane Austen classic - with a twist

Life and Style
i100

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Property Underwriter

£70-90,000: Saxton Leigh: Our client a London Market Insurer are seeking a Pro...

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week