The Upton St Leonards investment club has been busy this summer. In spite of continuing fears about the state of the economy, the club members, mostly retired professionals from a village near Gloucester, have been plunging back into the stock market.

At their meeting towards the end of last month they agreed to put £1,000 each into half a dozen different shares. Richard Sugdon, the club treasurer, says: “We recently adopted a new strategy of buying smaller amounts of a larger number of shares. This helps us to spread our risk more widely, which is important because we think that there are more problems to come in the economy.”

As an additional risk-management measure, the club members have introduced a limit rule, which means that shares are sold when they have risen in value by 25 per cent. This is designed to crystallise profits and not allow them to slip away. At the same time they have discontinued their stop-loss policy. In the recent highly volatile market, the stop-loss limit was triggering the premature sale of what were basically sound companies, simply because of a few days of plunging share prices.

The club now holds 17 different shares, 15 of which have been bought on the £1,000 per holding policy. There are no stop losses on any of the shares and only one — Lloyds Banking Group — does not have a 25 per cent limit.

Lloyds is the share that has given the club’s members most to think about over the past few months. In May they bought a second helping of the shares to add to their initial purchase last year. Then in June they decided to take up their rights-issue allocation and were then given some additional shares in lieu of a cash dividend.

Mr Sugdon says: “It was quite a tricky business agreeing what to do about the rights issue because it came some weeks before our scheduled meeting and we had to make a quick decision. We did an e-mail to all the members and the verdict was that, though Lloyds shares had fallen quite sharply, they would recover in due course and now would be a good time to buy.”

The half a dozen new shares purchased at the June meeting were Blacks Leisure, Stobart Group, Babcock International, Mitchells & Butlers, Northern Foods and Centamin Egypt.

Mr Sugdon says that Blacks Leisure, the camping retailer, was bought because it is developing new types of store with an emphasis on lifestyle clothing as well as the more traditional camping equipment. It also stands to benefit from the growing number of people who are deciding to take their holidays in the UK rather than overseas.

Stobart Group got the nod because transport is always going to be an essential industry and Stobart has most of the bases covered. In addition to its well-known fleet of large lorries, it owns ports, an airport (Carlisle) and railway rolling stock.

Babcock International, the contractor, was viewed as a solid buy because it has a strong order book of £5.7 billion and performs a large amount of defence work, which is likely to be fairly recession-proof.

Mitchells & Butlers, the managed pubs operator, was selected because it has proved a good performer in a fairly lacklustre sector. It has reported strong sales in the first quarter of the year and is regarded as a go-ahead business.

Northern Foods was picked for its defensive qualities. Mr Sugdon says: “People still need to eat, whatever the state of the economy, so that should limit the downside potential of this share.”

The final selection, Centamin Egypt, was a more exotic choice. It is a mineral exploration company that has the right to mine gold in Egypt — and quantities of the precious metal are just starting to come off the production line. Mr Sugdon says: “We have already bought this stock once and banked a 25 per cent profit. But we think that there is more potential to come and are going in for a second time.”

Since the investment club made its first share purchase in October 2004, the members have turned an initial investment of £1,600 each into a portfolio worth £1,709 each — a return of 6.8 per cent. This compares with a fall of 8.8 per cent in the FTSE 100 index of leading shares over the same period.

Analysis: Uphill struggle for Mitchells & Butlers

Formerly known as Bass Taverns, the retailing arm of Bass, Mitchells & Butlers manages pubs, bars and restaurants such as O’Neill’s, All Bar One and Harvester.

In the past five years the shares have risen from 250p to nearly 900p in mid-2007, before crashing to less than 150p late last year. After a modest rally the shares are now about 250p.

One of the factors behind the fall in the share price was an ill-timed property venture, which resulted in almost £500 million of pre-tax losses.

Tim Clarke, of Brewin Dolphin, the stockbroker, says that the company is still facing an uphill struggle. Its level of net debt, at £2.6 billion, is greater than its market capitalisation. It is not paying a dividend this year and is unlikely to pay one in the next couple of years. Sales are rising slightly, but profit margins have been squeezed.

Times Recommends

• How to sell your home in a downturn
• How to boost your spending power
• Unemployment benefits explained