Everything you need to know about the markets when you start work tomorrow.
PHELPS PORTFOLIO 2009
WE have taken on board some painful lessons from last year to pick six share tips with a Scottish bias which look set to sail merrily ahead in the further storms predicted for 2009.
This time round we have minimised our exposure to the fragile UK economy to concentrate largely on companies which stand to gain from the weakness of the pound. each of them is expected to produce higher profits and dividends in 2009. As usual, we are investing a notional £1000 in shares of each company, and have set a stop-loss level which indicates when an individual share price may have passed its peak and should be sold.
Our initial target is to beat the performance of the benchmark FTSE 100 share index for the seventh successive year and we will be disappointed if the portfolio does not return to previous winning ways to earn decent profits.
Unlike other newspapers, we have delayed making our annual selections in order to avoid the thin and volatile stock market conditions in the immediate aftermath of the festive holidays.
However, the delay worked in our favour in the case of Scottish and Southern Energy, whose shares shed 8% on Wednesday morning after chief executive Ian Marchant revealed a surprise plan to boost the balance sheet with a £500 million share placing. While the move adds a degree of uncertainty, we feel that the share setback presents a buying opportunity as it has been backed by a promise to lift dividends, which means investors can expect to pick up payments of £5.65 on every £100 share purchase at current levels.
SSE is the only one of our picks to have a heavy reliance on the UK but is a special case in that its nine million customers have little choice but to continue buying its product during this winter's unusually protracted cold snap.
More typical of our selections is Johnnie Walker whisky and Smirnoff vodka group Diageo, which earns 92% of its cash overseas and is tipped to pay dividends worth £3.80 for every £100 invested in its shares at current levels.
profits from its Irish-produced Guinness may be squeezed by the high euro, but the strength of its brands means chief executive Paul Walsh was able to report that recent profit growth has still been running at around 6% annually and better returns look in the bag for 2009.
Similarly, Rosyth shipyard owner and nuclear services group Babcock International should brush aside disappointments over delays to the contract for new Royal Navy aircraft carriers with news of another set of record results this year and will report a big increase in dividend payments.
Shareholders can take comfort from its
£5 billion-plus order book and its healthy balance sheet, which shows £374m debts against a £600m loans facility which it is not due to renegotiate until 2012.
Glasgow-registered waste management group Shanks is an obvious gainer from the strength of the euro over the past year, with 88% of its money earned in Holland and Belgium.
While this also adds to the cost of overseas debts, we understand that directors have made progress in reducing the company's loan book, which stood at £270m at the half-year stage, and we look for a 10% increase in dividends, taking the yield to around £5.28 on a £100 investment.
Unusually, the group is likely to earn higher profits on its home territory in coming years as it introduces its revolutionary Orgawold treatment to the UK and gains from PFI contracts, as well as recent investments which include its new treatment centre in the heart of Glasgow.
We are latching onto the coat-tails of pumps tycoon Jim McColl for our fifth tip, the materials handling minnow Clyde Process Solutions.
It may be only a small part of his burgeoning Clyde Blowers empire at present, but it tripled in size last year after an American acquisition and advisers at Arden are looking for payment of a maiden annual dividend to accompany news of virtually doubled profits. The shares have been held back by the overall performance of the Alternative Investment Market - down 64% last year - and the presence of Icelandic shareholders, but are poised for a re-rating. The catalyst could come from UK-wide publicity next month when the latest Rich List is likely to show that McColl is now Scotland's wealthiest entrepreneur.
Livingston-based Craneware, which supplies computer technology to American hospitals, is one of only 5% of quoted companies to have seen a rise in shares last year and it looks poised for another healthy increase in 2009 as it gains from the strength of the dollar.
Followers look for a modest maiden annual dividend to accompany news of a 50% surge in profits this year, with more to follow in 2010.
OUR SHARE TIPS FOR 2009
Diageo
Value: £23.65b
Price: 955p
Current Dividend: 3.5%
Forecast Dividend: 3.8%
Stoploss: 875p
SSE
Value: £11.0b
Price: 1169p
Current Dividend: 5.09%
Forecast Dividend: 5.65%
Stoploss: 1050p
Babcock
Value: £1.5b
Price: 529p
Current Dividend: 1.8%
Forecast Dividend: 2.75%
Stoploss: 440p
Shanks
Value: £292m
Price: 124p
Current Dividend: 4.88%
Forecast Dividend: 5.28%
Stoploss: 110p
Clyde Process
Value: £15.55m
Price: 38.5p
Current Dividend: Nil
Forecast Dividend: 5.84%
Stoploss: 32p
Craneware
Value: £55.25m
Price: 214p
Current Dividend: Nil
Forecast Dividend: 0.87%
Stoploss: 185p
*****
JOHN PHELPS' PORTFOLIO: SHARES UPDATE
OUR share tips made a cracking start to the New Year with more than 90% showing some sort of gain when we conducted our usual weekly review of progress on Wednesday morning.
The performance encouraged us to make a fresh £1000 investment for the disappointing 2007 portfolio, which is still in desperate need of a further impetus after trimming its overall losses from 35.1% to 31.7% last week. The cash has been spent on buying more shares in Scottish coal miner ATH Resources, reducing our average purchase price from 200p to 103.5p.
We recognise that trading has suffered from lower commodity prices but find it irresistible that shareholders can now pick up £8.50 in dividends for every £100 invested in the shares at the current price.
Followers are due to get an update on production at the group's Scottish mines along with moves to expand into Australia at the group's annual meeting on Tuesday.
Money for the purchase came from the sale of our short-term investment in shares of British Energy which realised a modest £60 profit ahead of the group's full takeover by the French EDF.
The 2008 selections also managed to register an improvement last week, trimming just more than £100 from total losses, with encouraging performances from Glasgow temporary power specialist Aggreko and undertaker Dignity.
Some of the biggest gains, though, were reserved for the 2006 portfolio which has entered its fourth and final year with average gains now stretching to more than 38%.
Four of the five recommendations showed some gain, while insolvency specialist Begbies Traynor marked time ahead of its interim results presentation on January 21.
Compass, the world's biggest catering organisation, was given a helping hand as two Sunday newspapers belatedly followed our example by listing the shares among their tips for the year.
*****
Stocks focus: Persimmon
PERSIMMON said it will not pay a final dividend for 2008. The York-based company, one of the country's biggest with a number of developments in Glasgow and Lanarkshire as well as West Lothian, said in a trading update that it would "continue to focus on conserving cash" in light of the current credit conditions. Persimmon, which said profits for the year would be in line with market forecasts, has completed 10,202 units at an average selling price of £172,000, to give revenues of about £1.76 billion for the year. The firm also has forward sales of around £400 million. Shares closed at 290.75p.
Stocks focus: Marks & Spencer
MARKS & Spencer's proposed closure of stores south of the Border and the axing of 1000 jobs thrust the high-street stalwart into the headlines yet again. While clothing was worst hit, it is the Simply Food chain that takes the big hit with 25 earmarked for closure. Executive chairman Sir Stuart Rose immediately pledged not to take a pay rise this year after the retailer announced its worst sales figures in a decade - total UK sales fell 3.4% in the 13 weeks to December 27. Analysts downgraded profit forecasts to about £600 million from £1 billion last year. Shares closed at 244.75p.
Stocks focus: Macfarlane
PACKAGING company Macfarlane said it would sell its Ireland-based plastics business to Procap Holdings of Belgium for a total cash consideration of £1.7 million. The Glasgow-based group, which wants to develop its main business, said it will use the sale of Macfarlane Plastics to reduce group debt, which was below £8m at December 31, 2008. Chairman Archie Hunter said: "The disposal of the plastics business enables us to focus on our operations in packaging distribution and the specialist manufacturing of labels and transit packaging." Shares closed at 18p.
Stocks focus: Weir Group
ENGINEERING group Weir admitted that it expects its 2008 profits to be better than expected. Net debt at December 31 is expected to be lower than the half-year figure of £261.7 million, with operating cash flow generation and the proceeds from the sale of the materials and foundries businesses being partially offset by an adverse foreign currency translation effect. Weir said that £625m of committed revolving credit facilities, expiring in 2011, is in place and provides the necessary "financial headroom" to support the continuing development of the group. Shares closed at 378.5p.
Print this story
Email to a friend
