The Babes describe themselves as “faithful” investors, and it seems to be true. The members of the Babes in the Wood Investment Club have sold only one share since we last visited them in March, but they have added another two to their portfolio.

The casualty was Vyke Communications, an AIM-listed internet telephony provider that they sold for 1.15p and a loss of 42.5 per cent. Graham Upton, a member of the club, says: “We took the decision to sell Vyke because its share price had remained flat for several months.”

While Vyke paid the penalty for an unexciting share performance, the Babes held on to BAE Systems, even though it has recently attracted a lot of the wrong sort of attention. The Serious Fraud Office (SFO) controversially halted its investigation into bribery at the company only weeks ago. Mr Upton says: “BAE Systems is one we are looking to hold for some time — uncertainty about the SFO investigation seems to have subsided and the news is now focused on the multibillion-pound investment with the Saudis for Euro-fighter aircraft.”

Lost baggage, strikes and a potentially damaging EU agreement has also failed to loosen the club’s attachment to British Airways. The airline recently admitted that it lost one million pieces of baggage last year, making it the worst baggage-handler in Europe. In addition, the airline was affected by poor weather in the UK over Christmas as well as several narrowly avoided strikes by workers. But perhaps the biggest problem is the European “open skies” agreement designed to increase competition for flights between the UK and the US.

Andrew Lobbenberg, an analyst at ABN AMRO, says that BA makes a “disproportionate” amount of money from flying across the Atlantic and he believes that the open skies agreement will hit the airline hard. A recent broker’s note from ABN AMRO said: “British Airways remains a well-run company, in our view. Open skies takes effect from April 2008, so there will be a full year of unaffected operations, with BA milking the cycle’s Indian summer [but] we think it is time for grateful BA shareholders to say a fond goodbye to an investment that has served them well.”

But other analysts disagree. Several still rate BA as a buy.

It also emerged this week that BA is in talks with private equity groups over a joint bid for Iberia, the Spanish airline. Iberia’s Latin American routes make Spain’s biggest airline an attractive target for airlines and private equity groups.

Mr Upton says: “Although still in profit, the club will look at whether to hold on to the shares, but BA has an uncanny knack of bouncing back, especially as it is carrying more customers and looking at renewing its ageing aircraft.”

But the Babes also took a punt on two new shares, Conister Trust, a small company providing hire-purchase credit (see Magnus Grimond’s analysis, below) and Sirius Exploration, a £2 million company that seeks out base metals. The latter floated on the AIM in 2005 and its shares are now trading 15 per cent above launch price. It has several joint ventures with Phelps Dodge, the world’s second-largest copper producer, in Macedonia, which will allow Sirius to exploit deposits too small to warrant exploitation by Phelps Dodge. Sirius has also agreed to analyse Rio Tinto’s Macedonian database for further opportunities there.

S.P. Angel, the house broker, says: “Though the company’s principal interest is in exploration of base metals, it is also exploring other opportunities to enhance its value.”

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