British Energy the nuclear power generator has already been outperforming
Posted in General on 12. Aug, 2010
British Energy, the nuclear power generator, has already been outperforming. This has taken it to a market capitalisation of over pounds 3bn, and into the FTSE 100 index, but the shares are still cheap. Finally, EMI could well be party to the closer integration of entertainment media.Colin McLean, Scottish Value Management.Tip: British Energy, 423pWhile events in the Far East have increased risk internationally, domestic businesses should do well. Elsewhere, general trading should produce earnings growth in line with (still to be further downgraded) general market expectations. The company has had to enact some far reaching restructuring of the US business, where industry trends tentatively indicate some improvement. The turmoil in Asia has precipitated further weakness.However, trading on only a small premium to the market but with an above- market yield, the shares now offer real long-term value.
Tip: Unilever 521pUnilever has built dominant market shares in products as diverse as margarine (Flora), detergents (Persil) and ice cream (Magnum). Under the leadership of Niall FitzGerald it has started to focus more clearly on creating shareholder value. Unilever has been shedding non-core business and making bolt-on acquisitions such as a Brazilian ice cream maker.With an exceptionally strong balance sheet we expect this process to continue. Although the shares have performed well in 1997, anticipating the benefits of the new strategy, we expect further performance in 1998.Robert Talbut, Royal Sun Alliance. Tip: EMI 508pSince the euphoric highs reached at the time of the demerger, EMI has significantly underperformed. This has been related not only to the lack of a bid but also to some reappraisal over trading conditions.
If the merger goes ahead the share price should bounce.The move into budget airlines is unlikely to be seen as influencing profits enough to affect the share price this year. The shares have reacted to all negative news so far and look set to fly in ‘98.Vanessa Williams, Legal and General. Industrial relations problems have plagued the stock in the last 12 months and merger talks with American Airlines have also unsettled confidence. Operating margins of 1.7 per cent are moving swiftly towards the 4 per cent norm for the sector. The changes in the industry should favour First Choice.Mike Grimble, Norwich Union IM.Tip: British Airways 560pBritish Airways offers good prospects for a rebound, having underperformed by around 23 per cent in 1997. Tip: First Choice Holidays100pFirst Choice, the UK’s third largest tour operator, is on the mend and well placed to benefit from the buoyant demand for holidays and changes in the structure of the industry. The present management team has brought stability to the group, enabling it to exploit its strong market position.Profits for the year to October 1998 are forecast to increase by roughly 50 per cent to around pounds 30m, implying a p/e ratio of just 13 times.
I like the mix of business with exposure in the US and Europe and they should be unaffected by events in the Far East. With building material stocks currently out of favour, Wolseley, at 483p, is relatively cheap.John Hatherly, M&G Investment Management. However, picking a single stock in the hope of takeover is a mug’s game. My stock is therefore Wolseley, is a well-managed distribution business with big shares in the plumbing and heating materials markets They have produced good returns over the years. Tip: Wolseley 483pIt is tempting to choose a financial stock for the best performance in ‘98 because there will undoubtedly be more rationalisation within the sector. Sainsbury’s fulfilled the promise of Tom Crombie at Scottish Equitable.At the other end of the scale, the sickly performance of the biotech sector knocked a hole in Skyepharma, Justin Seager’s tip at Dresdner Kleinwort Benson.This year’s recommendations come from most of the same fund managers as last year plus a welcome debut by M&G.Tom Crombie, Scottish Equitable. Julian Fosh of Scottish Amicable was the clear winner with British Gas.