Share Review 2004: Marks rides up with wear but Leeds United is relegated

There is never an easy way to break bad news. This year, however, you really will need to sit down and see if there is a relative who can stay with you. If at the start of 2004 you had decided to follow our tips and invest in The Independent on Sunday portfolio of six stocks, you would have lost money over the year.

A fund tracking the FTSE All-Share index would have generated a gross profit on a £100 investment of £8.73. Not huge, but still a profit. Whereas if you had opted for the IoS stocks, your £100 would have been whittled down to £72.06.

But then, that is exactly the problem with taking a punt on stocks: it is just that, a punt, and results can go against you as often as they go in your favour. The 2004 portfolio had a high risk factor and the poor performance was largely down to two rogue stocks, Jarvis and Leeds United. These were always adventurous bets, and if the outcomes had gone in the investor's favour, it would have been a bumper year. It was just that this time round, the gamble did not pay off.

Marks & Spencer

But first, some good news. Thanks to Philip Green, shares in the high-street giant rocketed as the newly installed chief executive, Stuart Rose, fended off the billionaire's £9.1bn takeover attempt. The stock ended the year up 18 per cent, and was the strongest performer in the portfolio, despite disappointing trading and results.

What 2005 holds, however, is another story. Rumours abound of a torrid Christmas for M&S, prompting concerns about how soon Mr Rose can deliver his hoped-for recovery. Or will Mr Green be tempted to try his luck with a third approach? Either way, watch this space.

Scottish & Newcastle

The brewing giant was the second-best-performing stock, closing on Christmas Eve a respectable 15 per cent higher. Only it and M&S beat the All-Share's improvement of 8 per cent. The news throughout the year from Scottish & Newcastle has remained generally positive, despite a dismal summer and changing tastes hitting demand for beer in Europe. Offsetting this, the group has reported strong sales in the large America market (where Newcastle Brown Ale has a cult following) as well as in Russia, and investors found it a safe bet. As ever, the speculation that it could be a takeover target remains - even though, so far, it has failed to be anything more than just that, speculation.

Jarvis

No other stock managed to make an improvement over the year, and figuring high among the disappointments was Jarvis, which plummeted 91 per cent.

At the start of the year, there was a chance the stricken support services group could be turned round, providing a real bargain for brave investors in the process. The turnaround failed to materialise, however, and there can be little surprise that, after 12 months of bad news, investors have been fleeing in their droves.

But those courageous souls who stayed with the stock did have something to celebrate as the year ended. Having warned earlier this month that it faced imminent collapse if new financing was not secured urgently, Jarvis has pulled off a series of deals, which have allowed it to agree a crucial refinancing package that will see it through to March 2006. Investors showed their gratitude with a last-minute scramble back into the stock, and the shares ended the Christmas week on an upbeat note.

Unilever

The Anglo-Dutch consumer goods giant was another potential winner that failed to make a comeback. The owner of a raft of household brands, including Slim-Fast, Ben & Jerry's and Lipton tea, was once a City stalwart. Its growth levels were as dependable as Christmas Day occurring every 25 December. It had suffered a few mishaps and missed forecasts in 2003 so surely, the logic went, 2004 had to be better.

That was not to be and the City continued to lose patience as sales, hit by stiff competition, particularly from low-carb products, failed to improve. Unilever closed the year down 2 per cent.

Woolworths

At the mid-year point, Woolworths was performing steadily. But fears of a tough Christmas on the high street have hit just about every retailer this winter, and Woolworths is no exception. Most analysts believe that its recovery is still on track, and chief executive Trevor Bish-Jones is well regarded. But nervy investors decided to steer clear during the festive season.

The chain makes almost two-thirds of its sales and all its profits in the second half, so the lack of confidence was understandable. After a good start, the stock ended the year down 8 per cent.

Leeds United

And so we come to the worst performer of all in the 2004 IoS share portfolio. The football club started the year facing relegation and a possible takeover, both of which duly happened. The shares, snapped up at 5p, were suspended at 2.75p prior to the takeover and investors did not receive a penny.

However, the unlucky stock picker behind our final choice need not feel too ashamed. Then aged only two, Jonas Nissé, elder son of the business editor, is not believed to have fully appreciated all the underlying fundamentals when he chose the stock, armed with a crayon and the Financial Times prices pages.

As for the wider market, overall it was a strong year. In the first six months, trading on the All-Share was stuck in a range of 100 points as analysts and economists debated the strength of the global recovery, the geopolitical situation and the impact of rate rises in the UK and US. But despite the price of crude taking off as the year continued, hitting record highs and breaching over $50 a barrel in October, equities performed well. After touching a low in the summer of 2,135, the All-Share motored ahead in the autumn and winter to close on Christmas Eve at 2,400.