Forgive Fibernet and let the cable guys give you a lift

Punting in the City
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The Independent Online

With the market on its knees and gloom in the air, you need steely nerves to be an investor in the technology-heavy TechMark. But now is the time to take advantage of the City's famous over-reactions.

With the market on its knees and gloom in the air, you need steely nerves to be an investor in the technology-heavy TechMark. But now is the time to take advantage of the City's famous over-reactions.

American gloom, fears over soaring debt levels and problems with mobile phone licences mean that the telecoms sector has more than its fair share of bad news.

There are, however, one or two stocks that have been unfairly tarred with the brush of despondency. One such company is Fibernet.

Run by Charles McGregor, the company provides cable to large corporates and organisations such as HSBC, the British Library and Direct Line.

Fibernet hit the headlines last November with a disastrous discounted rights issue that wiped 23 per cent off its price in just one day. Shareholders have yet to forgive it, and its price has languished ever since.

But this may prove to be the opening for new punters.

The rights issue injected a dollop of cash on to its balance sheet and the company now has around £100m to play with. While many rivals sink under a mountain of debt, Fibernet is sitting pretty. To meet its growth objectives, which include expansion in France and Germany, the company doesn't need to turn to the debt or equity markets, something which shouldn't be underestimated.

This alone, of course, does not make it a good stock. However, the company's strategy looks sound, with good progress on the deployment of its network, and orders on the up. All the signs point to a decent set of results later this month, giving the market something to cheer about.

Trading at a near one-and-a-half year low, the shares look cheap. Buy at 380p.

A furniture stock to sit on

For punters just too nervous to dive back into the technology sector, there are still one or two pockets of the old economy left to try. Despite the grim tidings of most economists, the UK retail sector has held up relatively well. Judging from results, overall performance has been sound, and the market, significantly, has held off from taking profits from the buoyant shares.

A good one to tuck away might be furniture chain MFI. It may not sound glamorous, but the group managed last year to grow like-for-like sales by 6 per cent, and the stock has outperformed the market by 100 per cent over the past 12 months. But, as the market always points out, history is irrelevant. The big question is whether MFI can continue to deliver. It's a tough call, but the odds certainly look good.

The share price performance reflects the City's confidence in new management. MFI was a company that needed a recovery story, and the new team has already given the market plenty of confidence.

There are also new growth drivers that make the stock attractive in the longer term. It has rolled out three of its high-street format stores, which have been a big success, and the group plans another 50 by 2003. It has plans to revamp a number of stores in partnership with Conran Design, which should help to push sales in higher-margin ranges.

The shares have priced in the new management, but not the other projects. At 97p, it's a nice one to buy and leave on the back burner.

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