Derek Pain: Healthcare Locums might help ease the hurt

The No Pain, No Gain portfolio is a pale shadow of the once-vibrant collection of shares that produced many winners. Before the credit crisis devastated the stock market, it achieved a near £150,000 profit and I felt it was capable of further headway.

For, I think, the first time since the portfolio was launched nearly 10 years ago, losers are, rather uncomfortably, the dominant force. Indeed, only two constituents are in the money, and each is well below its peak. However, thanks to the early successes I can still claim an overall gain.

Because of past disasters, membership is down to 11. I believe that about 15 is the ideal strength, but with shares likely to be cheaper tomorrow, I hesitate about recruiting. After all, the shares enlisted this year are in the red. Still, for a buy-and-hold investor, shares are now in a 50 per cent or more bargain sale.

It is impossible to judge their low point. Bells do not ring. They may have already hit it. Influential individuals say the worst is over. The chances are that few, if any, investors have – or will – experience the warm glow of getting in at the very bottom. But brave buyers will have the satisfaction of knowing that although they have not fully benefited from the long-running City share "sales", they have at least obtained some real bargains.

Almost certainly I will soon venture forth, although I expect the portfolio will initially have to tolerate some short-term losses. Hopefully, within a year or two, shares will start to perk up. Don't forget that the stock market is adept at anticipating events. It will be signalling the end of the recession before most of us are aware that the economic climate is moderating.

My own guess is that we will witness a gradual improvement in the second half of next year. Even if I am being too optimistic, make no mistake about it – the bounce will eventually appear. History declares that the dark days do not last for ever. In more normal times we could, perhaps, look forward to the traditional Christmas and New Year upsurge. But even before the credit crunch, its power had waned.

I have yet to decide which shares to recruit to the portfolio. A number are under the Pain microscope. It is my intention to lift portfolio membership back to at least 15.

Healthcare Locums is among the candidates. November was its best month ever, and it seems it will have no difficulty meeting pre-tax profit forecasts of £18.2m (£11.9m) for the current year. Researcher Equity Development hopes for an impressive £31m next year. Not surprisingly, the shares are not far off their peak. Even so, at 113p they are selling at around eight times this year's prospective earnings.

The group joined the dividend list with a maiden interim payment and a total of 2p is expected for this year. Stockbroker Daniel Stewart says the shares are "ridiculously cheap"; it has set a 225p target.

Marstons, the brewer with around 2,250 pubs, is another share I find interesting. I realise that the booze business is deeply unfashionable, but there is little doubt that vertical integration – producing, wholesaling and retailing – is far more viable in these cheerless days than stand-alone pub chains. Although profits fell last year and Marstons makes no secret that it faces tough times, it had the confidence to increase its dividend, putting the shares on a near-11.5 per cent yield.

Once upon a time, only the most dodgy shares would command such a sky-high return. Yet Marstons is a well-run group, strong in assets. Although I may be in a minority, I believe the shares are heavily oversold.

ASOS, the online retailer I have featured before, is a candidate; so too is Scotty, another past subject.

At the interim stage, ASOS produced a 68 per cent profit advance to £4.1m. More than £13m seems likely for the full year.

Scotty, an audio, data and video communications group previously called Motion Media, has at last moved into profit, achieving £927,000. Chairman Lord Trefgarne is "cautiously optimistic" that this year's result will be even better.

Other possible recruits are under consideration. I suspect that it will not be long before the portfolio is back, buying for the longer term.