Our money managers’ best tips from 2005

Jun 15, 2006

This year, we ran a series of Roundtables inviting our favourite money managers to tell us about their take on the markets. Here, we look at how some of their tips have performed

Most of the stand-out tips of the year have come from the commodities sector. At our February Roundtable, Bob Catto of Williams de Broe made the best call of the year with South African-listed uranium play Aflease, shares in which have risen 100% since. At the same time, he tipped Heritage Oil, which he called a “huge play in a brand new oil province”. The market agreed: the shares have risen 60% since. Oil and mining stocks were popular with other Roundtable members too. James Ferguson of Pali International tipped both Shell and BP at the same meeting (up 13% and 14% respectively since), and Tim Price of Ansbacher Wealth went for diversified miner Anglo American (up nearly 40%). In March, Price kept going with mining, tipping BHP Billiton and Rio Tinto (up 20% and 40%), as did James, who went for BP and Shell again.

So what would the two suggest we do with all these stocks now? Hang on to them. “Shell and BP are dead safe major stocks, offering deep discounts to their long-term fundamentals,” says Ferguson, “and I expect them to keep rising steadily throughout next year.” Price feels much the same about the miners. We are, he says, still in the early stages of the commodities cycle and that means shares in resource companies still have a long way to go. “Buy on any weakness.” One more tip in the resources sector, tipped in November by Giles Hargreaves of Hargreave Hale, is Egdon Resources, an onshore oil exploration firm also getting into gas storage. The shares have jumped 18% in the last month, but Hargreaves says he’d still be a happy holder. The firm has just successfully raised £90m to fund the development of its gas storage units and two directors have recently purchased £100,000 worth of shares.

Another area that found favour was Europe. In March, Sven Lorenz, founder of the Profit Hunter Files, noted the “amazing opportunities” created by cost cutting and restructuring. He tipped LVMH (up 30% since) for its ability to leverage its brand to make “real money” in China; Zurich Airport (up 36%), which at the time was trading below its book value; and insurer Munich Re (up 22%). In August he tipped Allianz (up 24%) and small-cap cosmetic producer Dr Scheller. Would he still hang on to all these? With LVMH, yes: it is “one of the best indirect plays on China there is” and is a “great stock to hold for another few years”. The same goes for Dr Scheller, which is expanding fast into Russia and should have another 30% to 40% upside. Lorenz would also keep holding Allianz and Munich Re, as they track the German market as a whole, and that is “still very much undervalued”. One he would sell is Zurich Airport. It has risen fast, and it is time to “take the profits and reinvest them somewhere else”.

The pharmaceutical sector also proved popular. In August, Pelham Smithers of Kensington Research tipped AstraZeneca and Glaxo (up 5% and 7% since), both of which he would keep holding, and in October, Oliver Russ, consultant for Argonaut/Britannic Asset Management, went for Roche, which he says he would hang on to for to its “interesting oncology franchise”.

The tech shares our Roundtable members would buy now

It’s been hard for the technology sector to get a look-in this year, what with all the excitement in the oil and mining sectors. But that doesn’t mean it has been completely neglected. In November, Patrick Evershed, manager of the New Star Select Opportunities fund, told us that 30% of his portfolio was in technology stocks of various kinds. A favourite, and the one he tipped at the Roundtable, was ClearSpeed Technologies (up 15%), a firm that produces amazingly fast microprocessors. He still loves the stock, which he tells us is the third-biggest holding in his fund. The firm has recently announced its first commercial contract and Evershed sees more following. Another fine tip was software firm XM Checkout Holdings, suggested by Mark Slater, founder of Slater Investments, in May. The firm was bought out after a 36% gain later in the year by Torex Retailing. At the same meeting, Slater tipped BT (up 6%), which he “would still call a buy”.

In November, Tom Bulford, editor of Red Hot Penny Shares, tipped Service Power. The shares haven’t moved much since, but Bulford is still keen on them. The firm’s software automatically programs the daily schedules of service engineers and is gaining popularity throughout the sector. Service Power has also been getting into outsourcing, recently gaining a contract to manage repair jobs for Argos Direct. Revenues are on the up, says Bulford, and the shares are “still a buy.”

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