Personal Finance: Diary Of A Private Investor - Like to see the future?
Which shares are most likely to ensure you retire in total comfort?
Saturday 18 December 1999
The first responses came from two professionals, men who are qualified and able to give investment advice.
Justin Urquhart Stewart of Barclays Stockbrokers opts for a technology stock, but it is certainly not one of those high-risk, here-today-and- very-probably-gone tomorrow shares. This one is a household name. In his opinion British Telecom (BT) is becoming a global winner.
"Companies whose core competence is in electronics or communications suggest themselves as favoured investments for the next millennium. BT has the technological edge and the operating experience.
"The joint venture with US operator AT&T provides a significant advantage to capture a major part of the corporate market. And a merger with AT&T to form the world's largest telecom company is a real and exciting possibility."
Chris Ring, managing director of NatWest Stockbrokers, is a telecoms fan too but he looks to Europe for his tip. He likes Telefonica, the Spanish telecoms giant. "This company combines our enthusiasm for continental European equities with our belief that telecoms and Internet-related companies should continue to thrive," he says.
"Not only is the mobile phone business in Spain poorly developed at present, but we are attracted by the group's recent decision to spin off its Internet business, Terra Networks. We believe that this business could dominate the entire Spanish-speaking world. Investor interest in the floatation tends to support our view."
Other professionals gave me their wonder stocks too. One that particularly intrigued me was Learnout & Hauspie, a Belgium-based leader in digital voice recognition. The company is quoted on the Easdaq exchange and the products it is involved with are the stuff that dreams are made of. They already have a service which translates foreign language telephone conversations instantly. But their aim is to produce computers you can talk to.
A Nasdaq company, CrossKeys Systems, also caught my eye. It is Canadian company that supplies performance management software to more than 160 telecoms providers in 45 countries. The phenomenal increase in demand for capacity means that the CrossKeys business is escalating at an enormous rate.
But a word of warning. The pressure on CrossKeys has been such that recently it lapsed into losses. However, management changes brought a sharper focus on sales and now analysts expect sales of over pounds 18 million for the current year ending 31 May 2000 and almost pounds 29 million in 2001.
Another technology tip is BATM, a computer hardware company, which is becoming known as "the plumber of the Internet". It bridges the gap between commerce and new technology and its latest development is a working prototype of a "photonic switch" which enables data to be moved around the Internet instantly. When the shares made their debut on AIM in 1996 they were 125p. Now they are over pounds 40.
Several of my investor friends treat buying and selling shares as their main source of income so we can be sure that their selections are well considered propositions.
John Mitson is a member of a number of successful investment clubs and carefully researches all his investments. His base criteria are that a company must be able to show continuous five-year growth and analysts' forecast growth for another two years.
John's tip for the top is another computer services company, DCS Group. He first bought the share just over two years ago, in August 1997, for 284p. Today it's around pounds 10.
"DCS has negative gearing, a return on capital employed of 93.7 per cent, expected earnings-per-share growth of 30.8 per cent for this year and 26.8 per cent for next year. It's a well-managed company with long-term growth potential. It's my strong buy," declares John.
Jack Murdoch is the archetypal patriotic Scot so it is not surprising that he selects Scottish Power as his share. He relishes the fact that it has snapped up such excellent English companies as Manweb and Southern Water and is within a whisker of completing a merger with Pacificorp in America. "I've met and talked with the management of Scottish Power," says Jack. "They're ambitious and they are building a great company."
Jim Slater particularly likes SFI, the pubs, hotels and theme restaurant group. The company is forecast to increase its earnings by 44 per cent next year and 30 per cent the year after that. "I think SFI shares are likely to treble in price over the next five years and carry a very low downside risk in the meantime."
And Terry's Top Tip for 2000? Quite independently, and before I knew his choice, I selected the same one as Justin Urquhart Stewart. BT. It has got a strong management structure that chases innovation and is at the cutting edge of new technology. It has formed alliances around the world to make sure it is a global player. And the clincher - BT already makes profits of pounds 100 a second.
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