A SUCCESSFUL private investor knows all about the importance of stock selection - you need a keen eye for the companies that will make you rich.

But just as important is the ability to recognise companies to avoid: those that will suck the profits from your portfolio.

We asked three stockbrokers to name companies that every decent portfolio should be without - some of which have hit the headlines recently.

If you already own shares in any of the companies in the list, you should probably hang in there. If you panic and sell, you could incur a heavy loss. Anybody else should not buy into our hall of shame.

Alliance & Leicester: The former building society converted to a bank in April 1997 when the shares started trading at 542 1/2p. Since then, the price has been volatile. From a high of 964p in 1998, the shares closed on Friday at 889 1/2p.

A&L has also recently ousted Peter White, its chief executive, making the City nervous about its prospects. Mark Johnson of Killik & Co says: "The bank is facing stiff competition from online and interactive rivals that can offer cheaper products that are easily accessible." Johnson puts Northern Rock, another converted bank, in a similar category and warns investors to steer clear. Northern Rock shares ended last week at 410p.

Coats Viyella: According to Justin Urquhart Stewart of Barclays Stockbrokers, the textile company is in steady decline. He says: "It is a sad fact that textiles can be bought and made up cheaper in almost any other country in the world." The shares have been sliding for four years, from a high of 220p in 1995 to a low of 24 1/2p at the end of last year. The shares are now worth 48 1/2p.

Freeserve: Killik & Co urges investors not to become victims of the fashion for internet stocks. The stockbroker is particularly wary of Freeserve, the internet service provider, which floated earlier this year.

On the first day of trading, the shares were worth between 237p and 244p. Johnson says: "It was overvalued at flotation and is operating in a crowded market. I would not put my money into Freeserve until it has proved its worth." The shares are 185 1/2p.

ICI: The chemicals company faces stiff competition from overseas. Although it is making money today, experts believe it cannot continue to be profitable. Jeremy Batstone of NatWest Stockbrokers says: "ICI is under intense pressure. I would not pick the company as a long-term hold." The shares closed at 616p on Friday.

Laura Ashley: The company has struggled to keep in step with public taste - and with the competition. Urquhart Stewart says: "Everything about this company has gone out of fashion. It is a stock-market dinosaur." The share price has dropped from a high in 1996 of 215p to 16 1/2p.

Marks & Spencer: All three stockbrokers advise not to buy these shares. The high-street retailer was once a byword for quality and value, but it has suffered an alarming fall in profits over the past two years. Its share price has slumped to 274 1/2p from a high of 670p in 1997.

Batstone says: "The management has simply been too slow to respond to change. It has not picked up on customer demands and has failed adequately to deal with competition. It will take some time to turn the business round."

Urquhart Stewart believes M&S can recover but says: "At the moment there are more marks than sparks and I would not go near it."

RJB Mining: Serious doubts hang over the future of the coal-mining industry - and RJB Mining, which is seriously in debt. The shares have been falling steadily over the past few years. From a high of 546p in 1996, they are now 35 1/2p.

Storehouse: The group owns BHS and Mothercare, both suffering from a poor brand image. Last week Alan Smith, chairman, announced plans to split the group into its two component companies. A merchant bank has worked out how to spin off Mothercare as a separate listed company. Storehouse would then become BHS. Urquhart Stewart is not convinced that restructuring will improve performance. "Splitting one bad company does not make two good ones," he says. The shares are 72 1/2p.

Somerfield: The supermarket chain is finding it tough to keep up in a cut- throat sector, particularly since Asda's takeover by Wal-Mart, the American giant. Somerfield raised hopes of an improvement in its performance with the acquisition of Kwik Save, but the hopes proved unfounded. Last week, it announced radical plans to sell 140 of its Somerfield stores and 350 Kwik Save supermarkets. The shares fell by 20% last Wednesday and closed at 91 1/2p on Friday.

WH Smith: The high-street chain is battling against fierce competition from out-of-town retailers and the internet. It seeks to exploit its position as the country's biggest bookseller and to control 30% of the internet book market in three years. It bought Internet Bookshop in 1998 and set up WH Smith Online. The shares are at 4061/2p, from a high this year of 782 1/2p.

Sunday Times 14 Nov 1999