No Pain,No Gain: The signs are more positive, despite this hiccup

Oh dear. Much to my dismay the stock market suffered a severe bruising in my absence. When I left, the Footsie was brushing 5,500 points and, with shares looking cheap, I felt confident enough to predict further progress. Well, since then investors seem to have got themselves into a rare old tizzy worrying about this and that and the index crashed more than 350 points at one time.

The good news is that the falls seem to be over and the atmosphere is once again highly positive - the retreat merely measures as a slight shudder on the notorious October Richter scale. In fact, the market has merely suffered another of those uncomfortable hiccups. After all, shares, even in the crazy dot.com days, did not go up in a straight line. Indeed, they never have.

Setbacks are to be expected. Sometimes there are external influences; on other occasions old-fashioned profit taking, which can snowball, takes its toll. Often it is a mixture. It is worth remembering that one of the wisest City sayings is that it is never wrong to take a profit.

Not much actually changed during my absence. All the difficulties I left behind were still in place when I returned. Perhaps a tendency to dwell on them emerged. Still, the market is often unfathomable in the short term. Yet investors should not lose sight of the fact that on realistic measurements shares remain cheap. If the hesitancy of recent weeks should return they could be even cheaper. However, true value will eventually shine through. I do not believe economic conditions will deteriorate dramatically and so long as international upheavals are avoided shares should remain a buy.

There is every chance of further strong capital appreciation. And in these low interest rate days growth can be coupled with some worthwhile dividend returns. It is not difficult to spot solid shares (such as HBOS and Rank) offering more than 4 per cent yields. And if those yields are too mundane what about United Utilities, with a tantalising 6.8 per cent.

I am not despondent over the way shares behaved in my absence. The No Pain, No Gain adventure has suffered setbacks. Overall profit has wilted to around £65,000 with many constituents at least a few coppers below the level ruling at the time of my last column. Most have been influenced by the market trend. But a couple had to contend with special factors. One, where an array of twists and turns has occurred, is Rentokil Initial, the pest control to security group.

I was pleased to see Sir Gerry Robinson abandon his attempt to assume control without conceding the necessity of making a takeover bid. His signing-on fee merely added to the pantomime atmosphere surrounding the whole episode. Still his withdrawal has not done any favours for the shares and around half of the portfolio's Rentokil profit has disappeared.

For the time being I will stick with the rat catcher. It has some cracking businesses and I am prepared to give the entrenched management a chance. Doug Flynn, the chief executive, faces a struggle. There is nothing in his pedigree to suggest he is up to it. But he was selected by chairman Brian McGowan, an old City hand, and I am prepared to back his judgement.

Lennox, distributing food and drink in Spain, has done itself no favours. After the boardroom bust up and disappointing trading comes a share suspension. The group is investigating a "possible warranty claim" that would appear to involve its chief executive, David Franks. The share freeze could be a technicality because the likelihood of liability was not mentioned in last year's flotation prospectus. But until more details emerge it is not possible to judge. I am, perhaps optimistically, pricing the shares at 32p - the suspension price - for this week's portfolio calculations.

Elsewhere, Access Intelligence is stuck below my buying price, despite some director buying. Georgica turned in mixed third quarter figures although at the nine month stage it had achieved a near £800,000 profit against a £1.6m loss. The tenpin bowling to snooker club chain is, traditionally, more active in its first and last quarters.

Avon Rubber has been on the slide. Results will not be scintillating and I have decided to dump the shares, suffering 20.5p a share loss. I realise the group operates in a tough environment but the big gas mask break through, the reason I alighted on the shares, has still to materialise.

Email: cash@independent.co.uk