How the tipsters fared in 2010 and who to watch in 2011
By
Tim Price Jan 07, 2011
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Every year Fleet Street's finest tip their top stocks for the New Year. Tim Price reviews last year's crop, and takes a look at their picks for 2011. Whose portfolio does he like the look of?
The stockmarket in 2010 came in like a lamb but went out like a lion, buoyed by quantitative easing and the lack of meaningful investment alternatives.
Investors were right to be nervous as the last New Year dawned, with fears over the impending British elections and ongoing tremors in the eurozone. The bulls were vindicated in 2010 – just. The FTSE 100 rose by 9%. But not all UK sectors did well: alternative energy stocks halved in value, while the banking, pharmaceutical and retailing sectors all lost money.
The market outlook now is somewhat cheerier, with greater clarity over politics and the coalition's determination to tackle the deficit. But renewed fiscal discipline comes at a cost: retailers face higher VAT, while government spending cuts will test outsourcing providers.
So as Fleet Street's tipsters face a challenging New Year, who to back – and who to sack?
There are some common themes in this year's recommendations. Britain's largest insurer, Aviva, is tipped by several pundits. Most cite the attractions of a 6% dividend yield. But its share price did nothing last year, and the likes of Lloyds and BP have recently shown the dangers of relying on what looks to be a high yield. BP is also a popular pick. But the share price has already rallied by 60% from its post-Macondo spill low, and the uncertainty over its legal exposure will linger for years. The expectation is that BP will resume dividend payments during 2011, albeit at a lower rate than investors are used to – the shares already look fairly priced to me.
Drug stocks are usually popular with tipsters, but this year only Shares rates the sector, plumping for GlaxoSmithKline and GW Pharmaceuticals. Mining stocks, on the other hand, can do no wrong: Shares goes for Aim-listed Chaarat Gold and European Goldfields; The Times favours Xstrata; The Sunday Telegraph plumps for Avocet Mining and European Goldfields, again; The Independent goes with African Barrick Gold and BHP Billiton; Midas for The Mail on Sunday likes Beacon Hill Resources; The Daily Mail recommends gold miner Centamin Egypt.
Metals and mining aside, it's difficult to spot a coherent theme behind this year's tips. The Sunday Telegraph, with Petrofac, is one of the few to mention oil and gas services stocks, which are a particular favourite of mine (with oil majors struggling to locate and exploit lucrative new finds, service providers in the energy sector look well positioned to me) – but then they go and blow it by tipping RBS. As the biggest basket case in the British financial system (no mean feat), RBS's business is, in my view, simply impossible to value properly.
This year I'm going with The Independent, who beat the market last year and whose tips for 2011 include three mining groups and the somewhat contrarian Sports Direct and general retailer Morrisons. I sense that Fleet Street's tipsters lack real conviction this year. Given that some very real economic challenges still lie ahead, that stance is probably correct.
• Tim Price is director of investment at PFP Wealth Management. He also writes
The Price Report newsletter
.
The Times – Personal Investor
Performance last year (Tempus portfolio): up 51.3%
Best tip: Hutchison China MediTech +150.6%
Worst tip: Valiant Petroleum -8.4%
Aviva (AV)
Insurance
The insurer's shares "went sideways" last year. But offering a yield of 6%, they look undervalued. Recent refocusing plans are good news.
• Price tipped: 393p
• 52-week high/low: 423p/294p
BAE Systems (BA)
Aerospace
Europe's biggest defence contractor has been "mired in controversy". But with its legal wrangles behind it and on a p/e of 7.5, it's a buy.
• Price tipped: 330p
• 52-week high/low: 389p/295p
Brewin Dolphin (BRW)
Financial services
Fund managers should enjoy a better year in 2011. This firm, which has an investment banking division, looks good value on a p/e of ten.
• Price tipped: 159p
• 52-week high/low: 164p/114p
Chemring (CHG)
Aerospace
Fears about cuts in UK defence spending plans saw these shares tread water last year. But on a p/e of ten, such fears are overblown.
• Price tipped: 2,904p
• 52-week high/low: 3,663p/2,598p
Imperial Tobacco (IMT)
Tobacco
Higher costs and regulatory concerns derailed the shares in 2010. But on a p/e of ten and offering a 4.3% yield, the tobacco firm is cheap.
• Price tipped: 1,968p
• 52-week high/low: 2,154p/1,753p
Pheonix Group (PNX)
Technology
This IT support services firm is investing heavily in cloud computing. Government cuts should be balanced by private demand. The p/e is nine.
• Price tipped: 267p
• 52-week high/low: 298p/189p
Tesco (TSCO)
Food and drugs retail
Even with spending cuts and a VAT hike, this retailer should emerge from 2011 "smiling". Buy on overseas expansion and a yield of 3.2%
• Price tipped: 425p
• 52-week high/low: 454p/377p
Travis Perkins (TPK)
Support services
Profits at this builders' merchants should continue to grow as consumers improve their homes rather than move. Buy on a p/e of 12.
• Price tipped: 1,058p
• 52-week high/low: 1,061p/665p
Tullett Prebon (TLPR)
Financial services
The shares have recovered strongly since last March, but still trade on a p/e of only eight. Rising interest rates should give this broker a boost.
• Price tipped: 383p
• 52-week high/low: 417p/212p
Xstrata (XTA)
Mining
Robust commodities demand should continue to see this miner do well. The yield of 0.5% is low, but the dividend policy is "progressive".
• Price tipped: 1,505p
• 52-week high/low: 1,579p/846p
The Sunday Times
Performance last year: up 23%
Best tip: IMI +82.3%
Worst tip: ACS –1.4%
BP (BP)
Oil and Gas
With its biggest troubles behind it, the oil giant should bounce back. On a p/e of six and with a takeover a possibility, the stock is a buy.
• Price tipped: 465p
• 52-week high/low: 658p/296p*
British American Tobacco (BATS)
Tobacco
This blue-chip tobacco firm offers a healthy yield of more than 4% and exposure to emerging markets. It's a buy on a p/e of 13.
• Price tipped: 2,464p
• 52-week high/low: 2,552p/1,950p
Capita (CPI)
Support services
This outsourcer should scoop up government contracts in 2011. The CEO recently bought 150,000 shares. On a p/e of 15, it's "easy to see why".
• Price tipped: 696.5p
• 52-week high/low: 803p/633p
KBC Technologies (KBC)
Oil services
This oil-sector consultant trades on 8.5 times earnings and yields 3%. A recent £27m deal with Mexico's Pemex may be a prelude to a bid.
• Price tipped: 59.5p
• 52-week high/low: 74p/40p
Pace (PIC)
Technology
This firm is a sound play on advancing consumer technology. Fears over threats from rivals have hit the shares unduly. Buy on a p/e of under seven.
• Price tipped: 182p
• 52-week high/low: 218p/155p
Pennon (PNN)
Utilities
This firm's growing waste arm, Viridor, justifies the p/e of 17. There's also the chance of a takeover.
• Price tipped: 640p
• 52-week high/low: 649p/543p
Raven Russia (RUS)
Property specialist
This Russian property firm was recently valued using a 14% yield, "way ahead" of the 6%-8% typical for UK firms. There could be lots of upside.
• Price tipped: 62.5p
• 52-week high/low: 66p/39p
Sports Direct (SPD)
General retailers
People in "austere Britain" shop at this sports retailer because it's cheap. Debt fell 25% in the last half year, with profits up 40%.
• Price tipped: 160p
• 52-week high/low: 176p/100p
Tui Travel (TT)
Travel and leisure
This travel firm was oversold last year due to fears over accounting woes. But a cold winter will help demand, as will the possibility of a bid.
• Price tipped: 246.5p
• 52-week high/low: 260p/189p
Shares
BP (BP)
Oil & gas producers
A rising oil price, ongoing restructuring and a gas discovery in Egypt are all catalysts for this oil firm's performance. Any bad news "looks priced in".
• Price tipped: 474p
• 52-week high/low: 658p/296p
Brammer (BRAM)
Support services
This engineering components supplier, which helps big businesses improve efficiency, is enjoying strong market conditions and should have a fantastic 2011.
• Price tipped: 230p
• 52-week high/low: 255p/115p
Chaarat Gold (CGH)
Aim
On an "ounces in the ground" valuation, this Kyrgyz Republic-based gold miner "looks cheap". Drilling updates have been upbeat and more are due.
• Price tipped: 73p
• 52-week high/low: 73p/31p
Chariot Oil & Gas (CHAR)
Aim
One or more deals on this oil firm's "massive acreage" position offshore from Namibia are expected early this year.
• Price tipped: 187p
• 52-week high/low: 221p/23p
City of London Investment (CLIG)
Financial services
This fund manager buys into emerging markets via investment trusts and should benefit both from clients increasing their appetite for risk and from rising markets.
• Price tipped: 458p
• 52-week high/low: 470p/267p
European Goldfields (EGU)
Aim
Its success in finally getting permits to start three large gold mines in Greece and Romania, along with takeover potential, make this miner a good prospect.
• Price tipped: 895p
• 52-week high/low: 981p/306p
GlaxoSmithKline (GSK)
Pharmaceuticals & biotechnology
This drug firm is a solid defensive stock, which offers a play on emerging markets and growth in consumer healthcare. The prospective dividend yield is 5.4%.
• Price tipped: 1,255p
• 52-week high/low: 1,341p/1,088p
GW Pharmaceuticals (GWP)
Aim
This drug firm makes cannabis-based drugs for niche markets. It has net cash on its balance sheet, strong products and "huge potential".
• Price tipped: 110p
• 52-week high/low: 156p/83p
Hutchinson China Meditech (HCM)
Aim
Booming profits from this firm's traditional Chinese medicine arm are being held back by start-up losses at two other units, but the firm has great potential.
• Price tipped: 501p
• 52-week high/low: 568p/185p
Majestic Wine (MJW)
Aim
The retail environment is difficult, but expansion, changes to minimum order sizes and a choice acquisition should help this wine merchant thrive.
• Price tipped: 398p
• 52-week high/low: 415p/210p
Parseq (PSQ)
Aim
This firm specialises in outsourced customer services for big companies. It should appear on more investors' radars this year, as it is "increasingly profitable".
• Price tipped: 8p
• 52-week high/low: 11p/5p
Quercus (QUPP)
Plus
This publisher should enjoy a bumper 2011 because it owns the English-language publishing rights to Stieg Larsson's bestselling Millennium trilogy.
• Price tipped: 138p
• 52-week high/low: 158p/25p
Steppe Cement (STCM)
Aim
This cement firm is perfectly positioned to benefit from any rise in infrastructure spending by Kazakhstan, which should have money to spend due to oil price gains.
• Price tipped: 46p
• 52-week high/low: 80p/40p
Theo Fennell (TFL)
Aim
The growth in demand for luxury goods will benefit this jeweller, whose new product range and improved website should help put it back in the black.
• Price tipped: 51p
• 52-week high/low: 66p/33p
Triple Plate Junction (TPJ)
Aim
This is the best of the "speculative" mining stocks due to the location of its projects in Papua New Guinea and its partnerships with big miners, but it is very high risk.
• Price tipped: 5p
• 52-week high/low: 8p/1p
Tullow Oil (TLW)
Oil & gas producers
A tax dispute with the Ugandan government has hit this oil firm's shares, but a "high-risk, high-reward" drilling programme makes it a buying opportunity.
• Price tipped: 1,236p
• 52-week high/low: 1,375p/980p
Vodafone (VOD)
Mobile telecommunications
This mobile-phone firm is turning from a growth stock to a yield play, thanks to a new focus on cash flow and increased dividends pay-outs.
• Price tipped: 170p
• 52-week high/low: 180p/127p
WPP (WPP)
Media
This media agency's profit margins should expand this year, pushing earnings up by almost 70% over the next three years.
• Price tipped: 767p
• 52-week high/low: 800p/569p
The Independent
Performance last year: up 13.5%
Best tip: Heritage Oil +62%;
Worst tip: JJB -80%
African Barrick Gold (ABG)
Mining
With inflation being a real fear, the world's largest gold miner should do well in 2011. It looks cheap on a forward p/e of less than ten.
• Price tipped: 611p
• 52-week high/low: 669p/503p
Arm Holdings (ARM)
Technology hardware & equipment
The semiconductor maker had a strong 2010, but with smartphone and tablet computer use continuing to rise, its "share price should follow".
• Price tipped: 423p
• 52-week high/low: 430p/183p
BHP Billiton (BLT)
Mining
The miner had a tough 12 months, but "this horse is worth backing" in 2011. It has "tons of cash", so higher dividends could be on the way.
• Price tipped: 2,551p
• 52-week high/low: 2,616p/1,938p
Domino Printing Sciences (DNO)
Electronic & electrical equipment
The food packaging labeller is making all the right moves in 2011 and looks set to grow in China, India and South America.
• Price tipped: 636p
• 52-week high/low: 650p/329p
F&C Asset management (FCAM)
Financial services
The fund manager will profit if markets rise this year. Its reputation as a corporate governance champion should also help.
• Price tipped: 84p
• 52-week high/low: 84p/48p
Morrisons (WM)
Food & drug retailers
The supermarket trades at a substantial discount to rivals, but it'll profit from its focus on food if consumers cut their spending to essentials.
• Price tipped: 267p
• 52-week high/low: 307p/257p
Rio Tinto (RIO)
Mining
Rio has recovered from the pricey acquisition of Alcan in 2007 and is now focusing on coal. It looks cheap on a forward p/e of seven.
• Price tipped: 4,486p
• 52-week high/low: 4,486p/3,390p
Smith & Nephew (SN)
Healthcare equipm't and services
The manufacturer of replacement hips and knees had a turbulent 2010, but "continued takeover chatter" should continue to push up the price.
• Price tipped: 676p
• 52-week high/low: 696p/537p
Sports Direct (SPD)
General retailers
Partly owing to controversial boss Mike Ashley, the sportswear shop is unloved. But with little competition around, profits will come "rolling in".
• Price tipped: 160p
• 52-week high/low: 162p/92p
The Daily Telegraph – Questor
Performance last year: up 28%
Best tip: Ashtead +113%
Worst tip: Drax -11%
Aviva (AV.)
Insurance
More cash generation ups the appeal of this insurer. It "could not only be a tip of 2011 but of the next few years because of its yield" of 6.5%, rising to 6.9%.
• Price tipped: 393p
• 52-week high/low: 429p/290p
Barratt Developments (BDEV)
Housebuilder
Barratt "has been snapping up land cheaply through the downturn". So all this firm needs to grow its profits is a stable housing market. It's on a 2012 p/e of 13.
• Price tipped: 89p
• 52-week high/low: 139p/71p
Blackrock Lat. Am. IT (BRLA)
Investment trust
Brazil's shares were rather "a damp squib" in 2010. But they could be preparing "for another carnival". This fund will focus on the Brazilian market in 2011.
• Price tipped: 766p
• 52-week high/low: 769p/553p
European Goldfields (EGU)
Gold miner
"A riskier play on the gold price than blue-chip players", this firm is "in the final stages of becoming a major gold producer". If targets are hit, a re-rating is likely.
• Price tipped: 887p
• 52-week high/low: 981p/395p
Johnson Matthey (JMAT)
Auto catalyst maker
Able to pass on high platinum prices, it should benefit from continuing strong growth in emerging market car demand in 2011. The p/e of 19 "looks justified".
• Price tipped: 2,038p
• 52-week high/low: 2,122p/1,435p
Royal Dutch Shell (RDSA)
Oil & gas producer
Shell is going for growth, which should be boosted by rising oil prices in 2011. Yet this oil giant yields a "very respectable" 5.1%, while the 2011 p/e is just 8.9.
• Price tipped: 2,138p
• 52-week high/low: 2,141p/1,554p
The Sunday Telegraph
Performance last year: up 34%
Best tip: Imagination Technologies +48.01%
Worst tip: GlaxoSmithKline -6.03%
Aviva (AV)
Insurance
Despite a lack of punch in this insurer's strategy, there's scope for some corporate activity, such as "an investor-pressured merger or takeover". Buy.
• Price tipped: 393p
• 52-week high/low: 429p/290p
Avocet Mining (AVM)
Gold miner
A recent disposal means this gold miner has "substantial firepower to invest" in West Africa. On a 2011 forecast p/e of 13.4, shares "should be re-rated higher".
• Price tipped: 237p
• 52-week high/low: 246p/81p
Barratt Developments (BDEV)
Housebuilder
Though housing is uncertain, Barratt has found a way to make money from it. With new land bought cheaply, the firm is well placed for a market recovery.
• Price tipped: 89p
• 52-week high/low: 139p/71p
Bowleven (BLVN)
Oil exploration
New Cameroon discoveries lifted this oil explorer's shares in 2010. With drilling plans fully financed, "there's every reason to bet the spurt has just begun".
• Price tipped: 379p
• 52-week high/low: 398p/90p
Informa (INF)
Media
This business service group is a far cry from the glamour of most media firms. But steady growth in its training and exhibitions units means 2011 looks good.
• Price tipped: 407p
• 52-week high/low: 451p/299p
Mulberry (MUL)
Clothes retailer
With 2011 spring/summer orders up 91%, Mulberry has become a "mini-Burberry". International expansion this year means this "hot brand is well worth a punt".
• Price tipped: 902p
• 52-week high/low: 954p/230p
Petrofac (PFC)
Oil & gas services
With multi-billion-dollar projects with government-backed oil and gas companies, this firm is "rightly an investors' darling". Expect very strong profits again in 2011.
• Price tipped: 1,587p
• 52-week high/low: 1,611p/936p
Royal Bank of Scotland (RBS)
Bank
Having "effected one of the most radical restructuring plans ever", RBS starts to look like it can "stand on its own". So investors "would do well to consider it".
• Price tipped: 39p
• 52-week high/low: 59p/29p
Royal Dutch Shell (RDSA)
Oil & gas producer
Shell has cut costs hard for years – with BP losing some of its lustre, it's now the "natural replacement in the income seeker's portfolio". Rising oil prices will help.
• Price tipped: 2,138p
• 52-week high/low: 2,164p/1,621p
Vodafone (VOD)
Mobile phone operator
With almost all its markets heading in the right direction, this mobile-phone firm can now sell off minority assets, boosting the shares, which already yield 5.3%.
• Price tipped: 166p
• 52-week high/low: 180p/136p
Daily Mail
Performance last year: up 17%
Best tip: VT Group +54%
Worst tip: BP -19%
Ashtead (AHT)
Support services
This equipment rental firm is well placed to benefit from any upturn in the construction sector. Profits rose by 41% in the first half of the year.
• Price tipped: 172p
• 52-week high/low: 177p/77p
Aviva (AV.)
Insurance
This insurer offers investors income as well as growth. Boss Andrew Moss's "aggressive" efficiency drive should deliver £400m savings.
• Price tipped: 394p
• 52-week high/low: 423p/294p
BP (BP.)
Oil and gas
The "persistent rumour" of a bid from either Shell or Exxon Mobil, coupled with the likely restoration of a dividend in February, make this oil major a buy.
• Price tipped: 466p
• 52-week high/low: 655p/303p
Centamin Egypt (CEY)
Mining
This gold miner has good, cheap gold production in place and should continue to benefit from the high gold price. The firm may soon join the "Footsie elite".
• Price tipped: 176p
• 52-week high/low: 197p/106p
Cobham (COB)
Aerospace
This aerospace and defence company's shares have "pepped up" due to rumours of a takeover bid. The shares yield 3.1% and the p/e is an undemanding 9.6.
• Price tipped: 207p
• 52-week high/low: 275p/192p
Diageo (DGE)
Beverages
This drinks firm stands to benefit from the rise of the Brics, as big brand spirits are increasingly popular in China. It may also pick up some new brands in 2011.
• Price tipped: 1,188p
• 52-week high/low: 1,215p/1,000p
Endace (EDA)
Software
This firm should benefit from the Wikileaks effect as it helps governments protect their computer databases. Shares are volatile, but it should be a good year.
• Price tipped: 361p
• 52-week high/low: 377p/157p
Entertainment One (ETO)
Media
Owning the rights to the Twilight films and Peppa Pig helped this film distribution firm more than double its value last year and it has more big releases to come.
• Price tipped: 140p
• 52-week high/low: 147p/67p
National Grid (NG)
Utilities
Government plans to overhaul the electricity market should benefit this firm's domestic operations. A prospective yield of more than 6% adds to the attractions.
• Price tipped: 555p
• 52-week high/low: 613p/484p
The Mail on Sunday – Midas
Aviva (AV)
Life insurance
Britain's largest insurer has been on an efficiency drive and is now well-placed for the future. The dividend is expected to grow.
• Price tipped: 393p
• 52-week high/low: 423p/294p
Beacon Hill Resources (BHR)
Aim
This firm owns the only coal-producing mine in the Tete province of Mozambique. That makes it an exciting prospect, albeit a risky one.
• Price tipped: 15p
• 52-week high/low: 20p/4p
Imperial Innovations (IVO)
Aim
This firm invests in early-stage companies spun out from scientific ideas. The firm has made several successful investments already.
• Price tipped: 530p
• 52-week high/low: 575p/395p
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