Is the stock market recapturing its thirst for pub shares? In the opening weeks of this year they have displayed remarkable strength, encouraged by cheerful festive trading statements.

Is the stock market recapturing its thirst for pub shares? In the opening weeks of this year they have displayed remarkable strength, encouraged by cheerful festive trading statements.

At one time, managed pub chains enjoyed heady ratings. Investors were attracted by the anticipated returns from new-style, high-volume outlets that seemed to bestow a new glamour on the rather dowdy image of most high-street boozers. But the pubcos fell out of favour even before the dot.com craze took its savage toll on old economy shares. They became yesterday's heroes, although most have rolled out the sort of returns investors expected when they paid the fancy prices demanded.

There was, as the dot.coms became dot.gones, some recovery last year. So far this year, as the market as a whole has tended to drift rather aimlessly, the pub contingent has comfortably outperformed. It is, perhaps, significant that Regent Inns, the chain that attracted some of the blame for creating the earlier investor unease, produced a fine set of interim figures last week.

Three years ago, Regent rocked the industry with a shock profits warning. It had not suffered a trading downturn; accountancy problems were responsible. The setback sent its shares, 388.5p at peak, crashing. They eventually hit 100p.

Regent was the first of the new-style pub companies to come unstuck and represented a sobering moment for investors, big and small, who had alighted on the trendy new pub industry with such enthusiasm.

Investing directly in pubs is a relatively new experience for the stock market. To a large extent, the investment opportunity was made by the Tory government's controversial Beer Orders, which forced the major brewers to dump 11,000 pubs. Then managed house chains, like Regent, flexed their muscles and suddenly investors had a whole new ball game to contemplate. During their short market life, the pubcos have attracted plenty of corporate activity and more takeover action is likely. Although the share decline would have almost certainly occurred even if Regent's accountancy systems had been in better shape, there is little doubt the group's misfortunes heralded the setback. Pub shares have a long way to go before theyrecapture their exuberance.

Regent shares are around 162p. On traditional investment measurements they are cheap. Year's profits should be around £15.5m (against £10.9m), offering a prospective multiple of 11. But the market has a long memory and is, I suspect, not yet ready to forgive Regent for its past indiscretion. Still, the company has some intriguing concepts. Its Walkabout sports bars are doing well, and expansion from 21 to 50 outlets is planned. It secured control last year of the Jongleurs comedy clubs, which it wants to increase from eight to 20. More recently Yates, with the dreaded profits warning, underlined the fickleness of the present-day drinker. But other leading chains, SFI and JD Wetherspoon, have avoided disappointment. In fact, they have hardly pulled a duff pint. Yet their shares have felt the occasional draught. With their trading records they enjoy relatively healthy ratings, though of course, their multiples are not what they were. Wetherspoon, just over 400p, has been 464p; SFI, now 240p, peaked at 278.5p.

The pub business nowadays embraces disco chains, such as Luminar and Springwood. Indeed, most nightclub groups embrace late-night bars - an area that attracts many of the managed house chains. Luminar appears to have comfortably absorbed the Northern Leisure nightclubs acquisition and, like Springwood, has joined in the new year's share advance. But one pub share out of favour is Enterprise Inns. It has, despite a fine set of figures, lost ground since the year's start. Enterprise eschews managed pubs, putting its properties in the hands of self-employed leaseholders or tenants. Income is largely from rents and discounts it negotiates with brewers and other drink suppliers. Its shares touched 472.5p around the turn of the year but have slipped to 420p.

Such a reaction seems harsh. Enterprise should produce profits of around £56m this year (against £41.1m) and is keen to increase the size of its pubs estate, currently nearly 2,600.