“IT WAS just luck really.” This is the modest comment from Dave Robinson, treasurer of the Upton St Leonards (USL) investment club, when he recalls how the club side-stepped the market turmoil caused by the credit crunch over the summer.

The club, which we will be tracking over the coming months, sold all but two shares between May and mid-August, keeping the members’ money safe in cash instead. “We made a decision in May that the market was not going to be that active and we were prepared to sit on the cash until it was the right time to go back in,” Mr Robinson says. The market was extremely active during August, but mostly for the wrong reasons, so USL’s strategy paid off handsomely.

USL comprises 15 men who live in or near the village of Upton St Leonards in Gloucestershire. They range from accountants to research chemists and owners of small businesses, but they all share an interest in the stock market. Their hobby has proved profitable as the club’s capital has grown by about 32 per cent since the club was established in 2004. Each member’s initial £2,000 investment is now worth about £2,700.

The secret of the club’s success so far is a rigorous voting system to decide which shares should be purchased and which should be sold. At each bimonthly meeting, members who want to propose a share must give a presentation on the company. The members will then rate all the companies and the scores are totted up to decide which shares will be bought. The maximum investment is usually £3,000.

Another key to the club’s success is a stop-loss system that ensures that shares that tumble in value are sold when they hit a prearranged price. At present, the stop-loss threshold is pegged at 12 per cent below the highest price hit by a share since its purchase. Stewart Atkinson, the chairman of the club, says: “We introduced the stop-loss after we suffered a heavy loss on Jarvis. Although it can be a bit heavy-handed, cutting us out of any bounceback in shares, it works for us.”

In the year to April 2006 the club made an 8.3 per cent gain, rising to 9 per cent in the following year. Unfortunately, quite a few of the shares disposed of since then have been sold at a loss, including Oakdene homes and Severn Trent Water, which were sold for a loss of 13.7 per cent and 9 per cent respectively. But the club nearly offset these losses by the profitable sale of its shares in Tanfield Group, a manufacturing company making zero-emission vehicles, which is listed on the Alternative Investment Market (AIM).

Last month the club decided the time was right to use its cash to return to the fray, buying seven more shares. But three – British Energy Group, St Modwen Properties and SThree – hit the stop-loss trigger only days later and were sold. The club now holds six shares, including several UK blue chip companies, such as Tesco and British Airways. Mr Robinson says: “We have tried to diversify our portfolio to include exposure to food, pharmaceuticals and aerospace.”

Most profits are ploughed back into the club, but the gentlemen have used some of the money to fund an annual night out for club members and their wives.

EXPERT ANALYSIS TESCO

SARAH BUTLER RETAIL CORRESPONDENT

TESCO has been a gold-plated investment for a good few years and it is no surprise that the club chose shares in the UK’s biggest supermarket chain as one of its buys.

Sir Terry Leahy, Tesco’s chief executive, has built an excellent team and has shown a talent for identifying what shoppers will want next. Spotting the trend towards convenience stores and internet shopping, as well as the power of the information that can be gleaned from a good loyalty card scheme, are just a few of the clever calls that have helped Tesco to grow to twice the size of its nearest UK rival.

The latest report from the Competition Commission’s continuing inquiry into the grocery business appears to clear Tesco from any particular censure and could be seen as creating the opportunity for even more stores in the UK through suggested changes to the planning regime. However, Tesco is clearly being monitored closely by the competition regulators, who now appear to take an interest in nearly every store purchase that the company makes, and it is unlikely to be able to drive the same level of growth from its supermarkets in Britain as it has in the past. The internet and Tesco’s nonfood chains – Homeplus and Dobbies – will help to keep things motoring in the UK, but the big story for the next few years will be international development.

Tesco already trades in 11 countries and next week will embark on one of its most ambitious ventures, starting up a completely new chain in America. Typically, Tesco has put a huge effort into planning the venture and has limited investment to £250 million a year, a relatively small amount of annual capital expenditure. But any slip-ups will reflect badly on Sir Terry and knock confidence in the business, even if he hasn’t “bet the house”. Meanwhile, Tesco is taking on China and Central Europe and is also looking for a partner in India.

It is a lot to handle at the same time. The Tesco team has been up to the job but its management resources are now becoming more stretched at a time when several high-profile rising stars have chosen to find their future elsewhere.

It is always wrong to underestimate Sir Terry, but the next few months will be tricky for Tesco and the shares are not particularly cheap at about 20 times expected earnings. Hold.