Derek Pain: Investors may not be checking in but I'll bed down with Safestay

Safestay's shares are showing a loss, but Derek Pain is not dismayed

It has been a hectic year for Safestay, one of the 2015 recruits to the No Pain, No Gain portfolio. Like most of last year's newcomers the shares are showing a loss; they are around 56p against a 70.5p purchase price.

However, I am not dismayed. The affordable-accommodation group is still in the early stages of developing a new hostel concept, and in the current stock market atmosphere it is not surprising that the shares of such a young company – started little more than two years ago – are not producing a stellar performance.

I would not expect Safestay to be in profit when it reports its full-year results in April. After all, the half-time figures showed a loss of £249,00 and chairman Larry Lipman has warned that establishing sufficient back-up facilities for a growing business will hit returns.

Still, a trading update for last year was encouraging. The group went from 560 beds to 1,500, doubling its up market hostels (near hotels) from two to four. And Mr Lipman says his style of hostel is no longer the preserve of students and backpackers but now attracts business travellers and families.

The group's original hostel, at Elephant & Castle in south London, continued to trade "strongly" and the Holland Park venue in west London, opened in September, attracted "strong interest". The hostel in York, after a slow start, has benefited from "improved demand" – and in Edinburgh, a £14.9m acquisition last summer, the group enjoyed "positive" early trading.

Still, Safestay is not satisfied with its increased spread. Mr Lipman has said the company is still on the lookout for properties both in this country and in continental Europe. At one time last year it was negotiating to acquire a Milan property, but decided to abandon its envisaged Italian job.

The current year will be an acid test for the aspiring group. I would expect returns to improve and the shares to benefit accordingly. The in-out referendum on Britain's membership of the European Union could produce further anxiety in the stock market, but once it is done, most shares should buckle down and Safestay's ambitions should be more appreciated.

Avation, the aircraft leasing group, is a long-time constituent of the portfolio. Although its shares are comfortably above my 83.5p purchase price, they suffered something of a low-flying experience immediately after the interim results. Like Safestay, expansion has taken its toll. The group recruited five aircraft during the half year but, more importantly, also raised additional finance for further acquisitions – and the cost of its new capital dragged pre-tax profits down from $7m (around £5m) to $5.6m.

However, lease revenue was up 14 per cent and earnings before tax and interest on Avation's $100m unsecured debt advanced 14.7 per cent.

Jeff Chatfield, the chairman, expects further additions to the group's fleet in the second half year and suggests lease revenue will increase significantly.

Avation shares nudged 180p last year. As I write, the price is around 137.5p.

In such an unsettled stock market, it is no surprise that the shares were marked down following the interim figures. But I regard prospects as satisfactory and see no reason why there should be recriminations for selecting the group as a member of the No Pain, No Gain portfolio.

In these troubled times it is best to hold shares or buy – not sell. As the investment group Fidelity has pointed out, between 1992 and the end of last year the FTSE 100 return was a not inconsiderable 486 per cent.