Derek Pain: Patience is the name of the game for investors

Spotting winners in a sea of losers is a difficult – some might say impossible – task. Even when a company is sound and manages to produce an encouraging statement, the chances are that its shares will at best mark time, but more likely actually give ground.

Five constituents of the No Pain, No Gain portfolio illustrate just how tough life is in the stock market at the moment as the fear factor continues to dominate investors' sentiment.

I drew attention last week to experts who believe it is time to start buying again. They may well be right. But, as far as I can detect, few investors are prepared to take the decisive action that would signal that the debilitating bear market, particularly in small caps, is coming to an end.

In the past few weeks Mears, the social housing and home-care group, and Nighthawk Energy, the US-focused oil and gas explorer and producer, have issued excellent trading bulletins without winning the stock market reward they could have expected in less torrid times. Hargreaves Services, Printing.com and Private & Commercial Finance have also offered largely ignored contributions.

It is generally accepted that Mears is as near recession-proof as it is possible to get. Last week, it underlined its resilience by telling shareholders that it was well on its way to achieving expected year's profits of more than £20m, against £15.5m last time. Indeed, the group is booked solid this year and has already achieved 81 per cent of next year's budgeted revenue.

The stock market response? A share retreat that has still to be made good.

Nighthawk is even more puzzling. It's true that its shares, as I write, are comfortably above the 19.5p low hit last month. And they did react positively to another upbeat statement. But most of the gain has since evaporated.

Yet the group – one of the few junior energy players with cash in the bank – seems to be making heady progress. Latest probes show that one of its sites could contain up to 1.5 billion barrels of oil. Further tests have to be completed but stockbroker Daniel Stewart reckons the shares are worth 100p. Researcher GE&CR has a 147p valuation. Both projections are below earlier estimates but are streets ahead of the share price – a mere 37.5p.

A strong profits performance followed by an encouraging trading statement has left shares of Hargreaves, the coal to waste-disposal group, near their year's low with much of the slippage occurring in the past month or so.

Private & Commercial is bumping along at around half the value achieved a year ago. Even so, the recovery at the hire purchase group continues. Last month's trading statement prompted stockbroker WH Ireland to forecast year's profits of £1.1m with £1.45m likely in the following year. Last time profits were £934,000. Ireland believes the shares are a buy.

Finally, Printing.com. Interim profits emerged 5.2 per cent higher at just over £1m with the group's income appeal strengthened by a 5 per cent dividend increase to 1.05p a share. Perhaps not surprisingly, the shares hardly stirred.

The uninspiring responses the portfolio's five constituents received to what were undoubtedly encouraging displays – particularly in these recessionary times – is, I suppose, further evidence that there remains a deep reluctance to buy shares. I believe each of the five has much to commend it, yet sympathy is in short supply with so many shares scratching around their lowest levels for a long time.

There are some signs that bargain hunters are circling and indications that director buying is increasing. But confidence remains elusive and until it returns in some abundance the stock market will remain a depressed zone. Indeed, I suspect that many investors, after suffering savage losses, need to get their breath back before they feel able to splash out again.

Still, those prepared to accept that shares they buy could represent dead money for some time should eventually be richly rewarded. Earnings and asset valuations are in some cases under intense pressure, but most companies are sufficiently insulated to survive, even remain profitable, in these tough times.

I believe buy-and-hold bargain hunters are on the right track. Undoubtedly, patience is now the name of the investment game. Spotting quick-fire winners is best left to determined gamblers.