Investment: Your jackpot dream is when tiddlers grow into giants

EVERY INVESTOR, big or small, dreams of hitting the stock market jackpot by alighting on a tiddler which grows into a giant. Very few do. Giants tend to evolve rather slowly. Many of the major groups of today were already big, or at least significant, players in the Sixties. There are exceptions. Colt Telecom, floated at 67p two years ago and 1,341.5p in January, is a splendid example of a current, sure-fire winner.

Often the best hope of jackpot riches occurs when a small company is taken over by a bigger operation in a share exchange deal and the enlarged group prospers.

But finding a business, still in its infancy but destined for stardom, is a difficult exercise. So many of them fail to get anywhere near the top of the ladder; indeed many do not even survive.

Any investor searching for tomorrow's stars usually has to trawl the undercard of the market, perhaps even alighting on Ofex, the lightly- regulated fringe share market.

It is on Ofex that some possible candidates lurk. One of them is Montana, a fledgling restaurant chain. Its attractions are not entirely unappreciated. Floated at 35p 18 months ago, the shares have been 242p; they are now 182.5p. The company runs three upmarket restaurants in the London area and has just opened a members club at Westminster with a 60-cover restaurant, private dining facilities, business services and function rooms.

Another restaurant opens next month. The group hopes to have 12 outlets by the end of next year. I suspect a cash-raising exercise is not far away to help fund expansion.

At the chain's first restaurant, in Fulham, trading profits are running at pounds 150,000 a year. Restaurants can be risky ventures but the rewards, if strong management is involved, are often high. Many commentators believe the risk of recession is over and, anyway, there has been little evidence of a leisure downturn in London and the South-east.

With the millennium excitement already in the nation's bloodstream, the leisure business should be in for a resounding year.

Nigel Popham, of stockbroker Teather & Greenwood, is keen on Montana's shares. After a pounds 37,000 loss he expects maiden profits of pounds 200,000 for last year and then pounds 940,000 for the current year.

The millennium should provide the quantum leap with profits of pounds 1.7m materialising. The Teather researcher has established a fine record among the smaller leisure companies. He descended on Po Na Na, a chain of north African themed bars, in its early days.

Its shares, floated at 10p three years ago, are now 102.5p following takeover talks with fully-listed leisure group, Break for the Border. Po Na No has lifted profits from just pounds 10,000 a few years ago to pounds 1m and is expected to produce pounds 2m in the year ending this month. Ofex can be an unrewarding market. Sometimes it is not easy to deal with. But it is a valuable part of the investment scene and provides a facility for trading in shares the Stock Exchange is prepared to ignore.

And, of course, the thrills and spills of small, fledgling companies are not for all investors, certainly not the proverbial widows and orphans.

Cautious souls should, if they venture on the undercard, stick to established companies with bagfuls of assets and a profits record. Only money which can be risked should be invested in the young hopefuls. Even then, it is better to halve the amount that you first thought of.

My first tip, Regal Hotel Group, failed to cover itself in glory when it produced results last week. Profits were up 15 per cent to pounds 20m, slightly below expectations, and the accompanying trading statement was rather cautious.

I suggested the performance of the shares should be closely monitored. Last week's fall underlined the wisdom of such an approach. The shares are 26p, just above their low. They should be given the old heave-ho if they get to 20p.