What the share tipsters are buying now
By
Tim Price Jan 08, 2010
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Every year Fleet Street's finest tip their top stocks for the NewYear. Tim Price reviews last year's crop, and takes a look at their picks for 2010. Which portfolios does he like the look of?
If there were ever a year to confound the maximum number of market analysts, 2009 was surely it. What began amid the wreckage of the banking crisis and universal gloom ended, courtesy of taxpayer support and quantitative easing, with something approaching euphoria. Contrary to expectations in January, the most speculative assets performed, well, spectacularly. The FTSE Industrial Metals and Mining sector returned more than 350% for the year. Classic defensives (insurance, electricity, fixed-line telecoms, utilities) lost money.
I find it very difficult to believe that history will repeat itself. It is hard (though given the capacity of investors to sprint from greed to fear, not impossible) to see how the stockmarket could be plunged into the sort of desparate trough that it entered during the first quarter of 2009. But by the same token, it is very hard to see how riskier equities can enjoy the sort of indiscriminate rally they experienced last year, given that the monetary authorities are fast running out of silver bullets. For sustainable gains, the stockmarket will need to see firmer evidence of genuine economic recovery than it has seen to date. Successful stock-pickers will need to be highly selective during 2010.
So once again, Fleet Street's finest tipsters greet the New Year by charging out of their trenches and back into the market. Who is likely to make it intact through enemy lines? And who seems set to be hoist by their own petard?
Shares magazine comes out with all guns blazing, and an array of Aim-listed tips to strike fear into the hearts of humbler investors, whether in technology (Advanced Computer Software and Akers Biosciences) or in last year's big winner, minerals (Avocet Mining). In 2009 I bought for clients some of their current tips, including Victrex (chemicals), Eaga (support services) and HSBC Infrastructure.
Mining gets another endorsement from The Daily Telegraph, which tips diversified giant BHP Billiton (another personal favourite) among others. And The Telegraph's performance last year was an impressive 56% gain.
The Times (whose tips gained on average just 8% last year) plays it particularly safe, with tips including BP in oil, BAT in tobacco, and SABMiller in beverages. The Independent meanwhile, whose portfolio generated a convincing 63% return last year, sees special merit in the retail sector, including JJB Sports (a share for the brave) and general retailer N Brown.
We enter the New Year with more than the usual uncertainty about markets, and very little by way of consensus, either among tipsters or anyone else. I suspect that given concerns over government finances and the election, 2010 will be a year that rewards pragmatism and a slight bias to defensive caution. For this reason I'm backing The Sunday Times tipsters, who err on the side of conservatism, with the likes of AstraZeneca in pharmaceuticals (a favourite of mine), Royal Dutch Shell (ditto) in oil and gas and Greene King in brewing. Their performance last year was impressive, with overall returns of over 47%. Good luck!
• Tim Price is director of investment at PFP Wealth Management. He also writes
The Price Report newsletter
(tel. 020-7633 3637.)
The Sunday Telegraph
Performance last year: up 28%
Best: C&C Group +106%; Barclays +76%
Worst: British Airways +3.8%; Land Securities -28%.
BG Group (BG.)
Oil & gas producers
With exposure to US shale gas and other natural gas projects, it's no surprise that this oil and gas producer is often cited as takeover material.
• Price tipped: 1,122p
• 52-week high/low: 1,180p/837p*
British Airways (BAY)
Travel & leisure
Not for the meek, but a boost in the global economy could lead to a £500m jump in revenues. "Thrillseekers should climb aboard".
• Price tipped: 187p
• 52-week high/low: 243p/111p
Care UK (CUK)
Health care equipment & services
Although not far off its year-high, shareholders in the nursing home provider believe 450p to 500p is likely as it becomes a private equity target.
• Price tipped: 429p
• 52-week high/low: 435p/225p
GlaxoSmithKline (GSK)
Pharmaceuticals & biotechnology
Trading at 10.5 times earnings and yielding 5%, shares in the pharma giant are "historically cheap".With economic uncertainty ahead, it offers "potential and stability".
• Price tipped: 1,319p
• 52-week high/low: 1,347p/982p
ImaginationTechnologies (IMG)
Technology hardware & equipment
Up 280% last year, shares in this maker of chips for smartphones could well keep rising as the market more than doubles in size by 2012.
• Price tipped: 241p
• 52-week high/low: 261p/56p
Lloyds Banking Group (LLOY)
Banks
Down 60% in 12 months, shares in the bank look oversold. It "must be the most vetted bank in the world, and for that reason it's a buy".
• Price tipped: 51p
• 52-week high/low: 76p/16p
Mitchells & Butlers (MAB)
Travel & leisure
One of the best-run pub groups "at an operational level", M&B should reintroduce its dividend this year, and a boardroom battle could see value unleashed from its property portfolio.
• Price tipped: 248p
• 52-week high/low: 311p/150p
National Grid (NG.)
Gas, water & multiutilities
This utility should hike its dividend by 8% this year, making it a good way to protect your wealth, while also giving an income yield that can be reinvested.
• Price tipped: 679p
• 52-week high/low: 717p/511p
Paragon (PAG)
Financial services
This "highly prudent" buy-to-let lender trades on 12 times 2010 earnings and has a 2.5% yield. "That understates the recovery potential" in the group.
• Price tipped: 131p
• 52-week high/low: 174p/39p
Royal Bank of Scotland (RBS)
Banks
With impairments lower than expected in the third quarter, and a number of analysts expecting a decent profit in 2012, the bank is a buy after "a rollercoaster year".
• Price tipped: 29p
• 52-week high/low: 58p/10p
The Daily Telegraph (Questor)
Performance last year: up 56%
Best: Centamin Egypt +188%; Templeton Emerging Markets +85%
Worst: Bunzl +11%; Primary Health Properties -3%
Ashtead (AHT)
Support services
The equipment hire group gets more than 80% of its revenues from the US, making it "a speculative play" on stimulus spending and economic recovery. Its balance sheet is "healthy".
• Price tipped: 81p
• 52-week high/low: 97p/31p
BAE Systems (BA.)
Aerospace & defence
Fears over defence cuts and a Serious Fraud Office investigation have depressed these shares, but look overdone. A p/e of 8.9 is "compelling" value for one of Britain's top firms.
• Price tipped: 360p
• 52-week high/low: 416p/294p
BHP Billiton (BLT)
Mining
This miner is a "one-stop commodity shop", covering oil, coal, iron ore and copper. The outlook for all of these is robust, thanks to strong Chinese demand. The yield is 2.7%.
• Price tipped: 1,995p
• 52-week high/low: 2,076p/1,025p
Drax (DRX)
Electricity
An impressive 7.6% dividend yield is the main attraction of this firm, which operates the Selby power station. Earnings visibility is good and the payout should be secure
• Price tipped: 415p
• 52-week high/low: 645p/394p
JPMorgan Russian Securities (JRS)
Equity investment instruments
Russia was one of the best-performing stockmarkets in 2009. With the economy recovering and sentiment improving, outperformance is likely to continue this year.
• Price tipped: 471p
• 52-week high/low: 514p/143p
Salamander Energy (SMDR)
Oil & gas producers
This speculative oil stock is drilling 12 exploration wells in 2010, so newsflow should be strong. Its finances are solid; increased production should double its cashflow.
• Price tipped: 297p
• 52-week high/low: 310p/91p
The Sunday Times
Performance last year: +47%
Best: Carphone Warehouse +109.3%; Standard Chartered +80%
Worst: BG Group +17.2%; Silence Therapeutics +1.1%
Advanced Computer Software (ASW)
Aim
This software firm helps primary healthcare providers improve productivity and is "unaffected" by government spending cuts.The shares have "further to go".
• Price tipped: 36p
• 52-week high/low: 42p/17p
Astra Zeneca (AZN)
Pharmaceuticals & biotechnology
This pharmaceuticals giant is "generating so much cash" it may raise its dividend. Two deals have "brightened the outlook" for its product pipeline. "A solid investment".
• Price tipped: 2,910p
• 52-week high/low: 2,966p/2,126p
Balfour Beatty (BBY)
Construction & materials
2010 will be a "big one" for new contracts at this engineering and services group as utility companies start upgrading their networks.There is plenty of room for growth.
• Price tipped: 259p
• 52-week high/low: 346p/243p
Greene King (GNK)
Travel & leisure
This pub owner and brewer has held it together in difficult times. Despite a "challenging outlook for the industry", these shares are "worth tucking away".
• Price tipped: 408p
• 52-week high/low: 577p/279p
IMI (IMI)
Industrial engineering
Play it safe with this manufacturing group. The management is "highly rated" and the shares should "perk up" as economic growth returns this year. The p/e is 10.8.
• Price tipped: 519p
• 52-week high/low: 552p/214p
Lloyds Banking Group (LLOY)
Banks
Having strengthened its capital base and made cost savings after the HBOS takeover, this year "will prove a turning point". Profit margins should rise, but it is "a risky bet".
• Price tipped: 51p
• 52-week high/low: 76p/16p
Royal Dutch Shell (RDSA)
Oil & gas producers
There is "much room for recovery" in this oil firm's shares as the oil price should rise in 2010 as demand increases from emerging markets.The yield is 5.8%.
• Price tipped: 1,882p
• 52-week high/low: 1,955p/1,362p
RPC Group (RPC)
General industrials
This plastic packaging company is starting to "reap the benefits of a two-year self-help plan". The firm has cut costs, free cashflow is increasing and the yield is 4%.
• Price tipped: 240p
• 52-week high/low: 282p/115p
Toluna (TOL)
Aim
A recent deal to buy Microsoft's online survey business should be "transformational" for this group. Revenues for 2009 are tipped to jump 123% to £49m.
• Price tipped: 231p
• 52-week high/low: 246p/221p
The Times (Times Money)
Performance last year: up 8%
Best: 3i +61%; Sage +27%
Worst: Reed Elsevier -2%; Workspace -52%
ARM (ARM)
Technology hardware & equipment
Shares in this designer of computer chips have always looked expensive: it trades on a p/e of 27 times. But it "has proved capable of matching reasonable expectations".
• Price tipped: 178p
• 52-week high/low: 185p/78p
BP (BP.)
Oil & gas producers
The oil giant is resolving its internal management problems under new CEO Tony Hayward. A dividend yield of 5.9% and a p/e of 10.4 times looks cheap.
• Price tipped: 601p
• 52-week high/low: 619p/400p
British American Tobacco (BATS)
Tobacco
With businesses fromAlbania to Zimbabwe and a "handsome" record of returns for shareholders, this is a very attractive defensive play on a yield of 5.2%.
• Price tipped: 2,016p
• 52-week high/low: 2,056p/1,481p
Colt Telecom (COLT)
Fixed line telecommunications
This business telecoms group survived the dotcom bust and is thriving today. However, it has yet to start paying dividends, making it seem relatively high risk.
• Price tipped: 133p
• 52-week high/low: 139p/72p
Hammerson (HMSO)
Real estate investment trusts
If retailers suffer, this shopping-centre owner will struggle to maintain its rental income and 3.7% yield. But its solid property assets offer some protection from inflation.
• Price tipped: 424p
• 52-week high/low: 460p/203p
Ladbrokes (LAD)
Travel & leisure
The bookmaker is to enjoy an upsurge in betting during theWorld Cup and the election.The main risk is another recession. It yields 5.3%.
• Price tipped: 137p
• 52-week high/low: 213p/114p
Premier Farnell (PFL)
Support services
Diverse international earnings are the strength of this industrial component distributor. But investors should be aware the firm has a history of disappointment.
• Price tipped: 172p
• 52-week high/low: 181p/113p
SABMiller (SAB)
Beverages
The brewer is not cheap on a p/e of 17 times. But its South African roots may work in its favour in the run-up to theWorld Cup.
• Price tipped: 1,824p
• 52-week high/low: 1,858p/906p
Standard Chartered (STAN)
Banks
The emerging-markets banking group is "probably the best UK quoted bank" and has come out of the crisis with its reputation intact.
• Price tipped: 1,567p
• 52-week high/low: 1,696p/554p
Xstrata (XTA)
Mining
If economies like China, India and Brazil continue to perform, this miner should do well. Useful diversification since it will be little affected by conditions in the UK.
• Price tipped: 1,121p
• 52-week high/low: 1,190p/287p
The Guardian
Performance last year: up 80%
Best: Monitise +475%; Asos +97%.
Worst: GlaxoSmithKline +3%; National Grid -1%.
Alphameric (ALM)
Software & computer services
This minnow technology stock has attracted serious takeover interest as its joint venture, Turf TV, cracks the racing and betting TV monopoly.
• Price tipped: 28p
• 52-week high/low: 38p/15p
DoriMedia (DMG)
Aim
The producer and distributor of Latin American soaps is enjoying strong demand from content-hungry eastern European and AsianTV channels.
• Price tipped: 65p
• 52-week high/low: 82p/29p
HSBC (HSBA)
Banks
With 63% of group profits coming fromAsia and Latin America, the shares "deserve a re-rating and could easily touch 800p".
• Price tipped: 708p
• 52-week high/low: 766p/270p
Kingfisher (KGF)
General retailers
DIY has had it tough amid the housing market slump, but the company's head insists he can drive growth by motivating top staff with a private-equity-style incentive package.
• Price tipped: 229p
• 52-week high/low: 249p/115p
Lloyds Banking Group (LLOY)
Banks
After its record-breaking fund-raising, there is a chance that the bank has turned a corner in 2010 as it ekes out promised synergies with HBOS.
• Price tipped: 51p
• 52-week high/low: 76p/16p
Marks and Spencer (MKS)
General retailers
The retailer had a tough time last year, but the new chief Marc Bolland is a miracle worker in the retail world after his unexpected success at Morrisons.
• Price tipped: 402p
• 52-week high/low: 412p/214p
Salamander Energy (SMDR)
Oil & gas producers
The oil explorer has some exciting drilling prospects in Indonesia and Thailand, just as the region cries out for more home-grown supplies.
• Price tipped: 297p
• 52-week high/low: 309p/91p
Stratex International (STI)
Miner
Shares in the miner are risky "but could be rewarding", with a significant new gold prospect in Ethiopia. The house broker has an 8p price target.
• Price tipped: 3p
• 52-week high/low: 5p/2p
VT (VTG)
Support services
With savage public -sector pay cuts on the way, this outsourcer for public services should cash in. A "good long-term bet".
• Price tipped: 519p
• 52-week high/low: 606p/412p
2ergo (RGO)
Aim
With no debts and £6.4m in the bank, this provider of marketing through mobile phones is "worth a punt on the future being mobile".
• Price tipped: 119p
• 52-week high/low: 139p/112p
The Independent
Performance last year: up 63%
Best: Taylor Wimpey +280%; Goldman Sachs +100%.
Worst: Begbies Traynor -24%; RBS -41%.
Anglo American (AAL)
Mining
Since escaping a takeover by Xstrata last year, the miner has "been making great strides to cut away at its excess fat". Strong commodity prices make it a good punt.
• Price tipped: 2,711p
• 52-week high/low: 2,845p/906p
Avanti Comms (AVN)
Aim
A play on government pledges to roll out broadband across the country.The firm provides satellite broadband to remote areas. It's also expanding into Europe and Africa.
• Price tipped: 449p
• 52-week high/low: 475p/154p
GW Pharmaceuticals (GWP)
Aim
This company's Sativex pain-relieving treatment is well on the way to becoming one of the successes of the bio-tech sector. It's already used to help those with multiple sclerosis.
• Price tipped: 87p
• 52-week high/low: 106p/30p
Heritage Oil (HOIL)
Oil & gas producers
This could be "one of the diamonds amid a lot of rough" in the oil exploration sector. A bidding war is likely for its Ugandan assets and it has a strong position in Iraq.
• Price tipped: 436p
• 52-week high/low: 630p/161p
JJB Sports (JJB)
General retailers
This sports retailer almost went bust last year amid "unseemly goings on". But debt is being refinanced and weak stores closed.The shares "are only going one way".
• Price tipped: 25p
• 52-week high/low: 39p/5p
London Stock Exchange (LSE)
Financial services
The exchange's market share has been under pressure, and a double-dip downturn would hurt. But new CEO Xavier Roulet is taking the right steps. "An easy buy."
• Price tipped: 718p
• 52-week high/low: 950p/356p
Nanoco (NANO)
Aim
An intriguing technology play, this is the first firm to mass-produce "quantum dots". These tiny semiconductor particles have many possible uses; expect big contract wins.
• Price tipped: 83p
• 52-week high/low: 88p/21p
N Brown (BWNG)
General retailers
The home-shopping retailer trades on a p/e of 10.6 times, a substantial discount to the retail sector. It operates in a promising, under-served niche market.
• Price tipped: 248p
• 52-week high/low: 277p/184p
Pace (PIC)
Tech. hardware & equipment
After the switchover in 2012, every house in Britain will need a digital TV access. That should be good for this firm, which makes set-top boxes for Sky and Freeview.
• Price tipped: 209p
• 52-week high/low: 244p/40p
Taylor Wimpey (TW.)
Household & home construction
"The most attractive of the housebuilders with a good land bank and reduced debts." On bombed-out valuations, it will benefit from even a small improvement in sentiment.
• Price tipped: 39p
• 52-week high/low: 55p/9p
Shares magazine
Advanced Computer Software (ASW)
Aim
The "immaculate" pedigree of the board alone makes this software firm, which focuses on the healthcare sector, attractive. On top of that you have strong cash generation and the prospect of further growth.
• Price tipped: 36p
• 52-week high/low: 42p/17p
AFC Energy (AFC)
Aim
This fuel cell specialist is "high risk" but it has secured funding through to mid-2011 and news flow on contracts should drive share price growth in 2010.
• Price tipped: 10p
• 52-week high/low: 17p/1p
Akers Biosciences (AKR)
Aim
A profit warning saw this medical supplies firm's share price plummet, but that means it has "great recovery potential". Renewed US government contracts for its BreathScan alcohol-detecting device would help growth.
• Price tipped: 14p
• 52-week high/low: 28p/11p
Alterian (ALN)
Software & computer services
Strong recurring revenues, new product launches and successful acquisitions mean this marketing software group "looks undervalued." The firm is "growing rapidly", and looks cheap on a p/e to growth ratio (PEG) of just 0.3.
• Price tipped: 168p
• 52-week high/low: 215p/47p
AvocetMining (AVM)
Aim
Rising inflation and government money printing should boost the price of gold in 2010. That should benefit this gold miner. Management is focused on raising production, which could hit 230,000 ounces a year in the next 12 months.
• Price tipped: 85p
• 52-week high/low: 107p/60p
Beazley (BEZ)
Non-life insurance
The non-life insurance sector offers "outstanding value" as it had an "underwhelming" year in 2009. This insurer has reduced the investment risk in its portfolio. The p/e is just 3.9 and the prospective dividend yield is 6.7%.
• Price tipped: 101p
• 52-week high/low: 139p/85p
Begbies Traynor (BEG)
Aim
There is little doubt that companies will continue to go bust in 2010, which should boost this insolvency specialist. Interim results are set to be "significantly ahead of last year".
• Price tipped: 105p
• 52-week high/low: 141p/87p
British Sky Broadcasting (BSY)
Media
By 2011, this broadcaster will be "reaping the rewards" of its huge investment into high-definition television. Earnings could grow at more than 20% a year as customers take more services, pushing up average revenue per user.
• Price tipped: 570p
• 52-week high/low: 593p/398p
Debenhams (DEB)
General retailers
This retailer is worth buying for 2010 as it has a debt reduction programme, has made some "shrewd" acquisitions and profit margins should improve. The p/e is 10.4.
• Price tipped: 83p
• 52-week high/low: 97p/24p
Eaga (EAGA)
Support services
A major overhaul of government spending could benefit this support services firm as the government tries to cut costs via outsourcing. Its expertise in energy efficiency should also be in demand in 2010.
• Price tipped: 142p
• 52-week high/low: 158p/112p
Fairpoint (FRP)
Aim
The "imminent resumption of dividends" at this debt solutions firm should be the catalyst for a recovery in the share price. The firm has moved back into profit and its debts are being reduced. The p/e of 5.7 does not reflect this.
• Price tipped: 57p
• 52-week high/low: 68p/33p
Falkland Oil & Gas (FOGL)
Aim
There is scope "to make serious money" if any of the firms operating in the Falklands region finds oil. The shares in this explorer should "perform well" in anticipation of a rival starting drilling in the area in February.
• Price tipped: 128p
• 52-week high/low: 141p/62p
HSBC Infrastructure (HICL)
Equity investment instruments
This fund is "positively correlated to inflation". It invests in Public Private Partnerships whose revenues are index-linked, but whose cost of debt is fixed, so any growth in inflation will boost the fund's net asset value.
• Price tipped: 113p
• 52-week high/low: 125p/104p
London Mining (LOND)
Aim
If activity increases in the global industrial market, iron ore will be a "hot commodity" in 2010 ,so buy this iron ore and coking coal miner. It has iron ore projects in four countries and is already producing in China.
• Price tipped: 204p
• 52-week high/low: 230p/192p
Luminar (LMR)
Travel & leisure
This is an "extremely high-risk tip". But all the bad news seems to be priced in to this nightclub owner, so investors should start to buy back the shares, which are near an "all-time low", as a recovery play.
• Price tipped: 48p
• 52-week high/low: 167p/37p
Micro Focus (MCRO)
Software & computer services
Interim results from this software group were "solid" showing that everything is "well under control" despite the recent unexpected departure of the chief executive. Debt is being rapidly repaid and organic growth came in at 8%.
• Price tipped: 455p
• 52-week high/low: 470p/258p
Redhall (RHL)
Aim
"Nuclear power could be set for a surprise return to fashion." This specialist nuclear engineer is well-placed to gain if new nuclear power stations are built in the UK. The group is in a "healthy financial position" and yields 3.5%.
• Price tipped: 145p
• 52-week high/low: 248p/121p
Reed Elsevier (REL)
Media
This publisher has had a rough 2009, but a "hefty underperformance and an attractive valuation" make it a good "contrarian" buy. The forward p/e of below 12 looks "way too low" given its "recovery potential".
• Price tipped: 491p
• 52-week high/low: 570p/404p
Standard Chartered (STAN)
Banks
This bank is an "obvious stock selection" for investors seeking exposure to the faster-growing economies in Asia. It recently confirmed that 2009 had seen a "strong performance". The p/e is 15.3, but the premium "is deserved".
• Price tipped: 1,564p
• 52-week high/low: 1,696p/554p
Victrex (VCT)
Chemicals
"High barriers to entry, robust margins and the prospect of a rapid recovery in earnings" make this, the world's top producer of polyetheretherketone (a polymer with a wide range of uses), a "worthy pick for 2010".
• Price tipped: 809p
• 52-week high/low: 841p/401p
Workspace (WKP)
Real estate investment trusts
Commercial property values have started to rise but this Reit has "lagged" the sector, due to its "dependence on small-company customers". Yet the worst is over for the firm's portfolio and values will start to rise.
• Price tipped: 21p
• 52-week high/low: 66p/10p
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