The latest in our regular series on the fortunes of the Reservoir Dogs share club, a group of London friends who pool cash and try to buy fast-growing shares This month: fortune favours the bold. THE START of 1999 certainly has been a corker for the club. Our six- month review this January showed the value of our shares up by 45 per cent, with the total fund showing a net increase (including costs and cash held) of 35 per cent in six months.
How have we been so lucky? Our star has been the small engineering firm Jones and Shipman. We bought the shares for only 10p each back in November, but within a month they had doubled to 20p. The machine tools firm, based in Leicester, has been on a ridiculously low rating. We thought the company would be a perfect buy for a bigger engineer.We were right! In mid-December another UK outfit, Renold, snapped up the company for cash We made pounds 450 profit on a pounds 450 stake.
We’ll probably reinvest our cash in some other unfashionable small engineering company waiting to be taken over.The value of our shareholding in Oxford GlycoSciences has more than doubled.There’s no bid story to tell here, just a correct prediction. The company, with a sound range of drug and science products, was unfairly hammered when it came to market in the spring The shares floated at 280p, and are now above that. Expect the price to stabilise and then take off when the City gets to know the firm a bit better.Acorn was another “in the dog house” story. It had received a hammering from the stock market as everyone thought it was yesterday’s story and made old computers for schools that no one bought. In the last month or so, it has dumped that old division and dedicated itself to making digital TV and internet technology work.There are also plenty of rumours that its huge stake in oh-so-sexy ARM (which makes amazingly fast microchips for new multi-media technologies) will be separated out and returned to Acorn shareholders.
As Acorn is currently valued at pounds 100m but its stake in ARM is probably worth pounds 150m you do not have to be a genius to see why the shares have gone up 75 per cent since we bought them.The story with our other two shares – Bradford Property Trust and AB Airlines, both bought in December – is a little less exciting. Bradford Property Trust is Britain’s largest residential property landlord. The buy-to-let sector is booming and investing in property is worth a punt. Bradford, being the daddy of all landlords, should benefit most. Add in a juicy dividend of over 5 per cent, and you have a safe bet.AB Airlines is a racy number.
The share price of this relatively new airline hasn’t moved but we have a hunch AB runs some pretty good routes. One group member flew a key route and was told by staff that most flights were nearly full. We reckon AB is a takeover prospect.Our latest buy is Brooks Services. Laundry and uniforms are such an unfashionable sector that Brooks’ shares languish at a ridiculous rating It also generates dividends yielding well above 5 per cent. Brooks will make a tasty mouthful for some bigger company.Think smallUnderlying our shares is an important group philosophy We tend to like shares in deeply unfashionable sectors. Smaller firms have tended to under-perform the bigger shares for years now and sectors like biotech and engineering are unpopular. There are usually very good reasons for this unpopularity, but, as markets behave like sheep, good firms also get dumped on.Our philosophy is simple.
