The Week In Review: Can Game beat the bogeyman and slay the monsters?

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The Independent Online

Investing in Game Group is quite literally a game of chance. If shareholders are lucky, the video games retailer will defeat the bogeyman (intense pressure on prices), slay the monsters (an ever-increasing number of competitors, including supermarkets) and find the princess (Microsoft's new Xbox 360 that launches on 2 December).

Then again, if the consumer backdrop remains tough, the likes of Tesco ramp up their attempts to conquer the video games market and Sony or Microsoft fail to churn out enough hardware to meet predicted demand, it could be Game Over by Christmas.

The company had a terrible start to the year. All the numbers - sales, losses and margins - worsened as the computer games market trod water, with Nintendo the only manufacturer to launch a new machine. Losses before tax in the six months to 31 July ballooned to £14.7m from £3.5m. Game instead focused on opening stores.

The hype about the next generation of consoles has pushed shares higher this year. Now they look overvalued given the risk that last year's Sony PlayStation2 fiasco - a shipment got stuck in the Suez Canal - could be repeated. Avoid.

Stream

Will people pay money to check their bank balances and order statements using their mobile phones? If yes, then the technology company Stream Group could be on to a winner. If not, its future strategy will be holed. Stream has an agreement with the Link cash machine network to supply the kit to make mobile banking work - a change of direction that has been prompted by a decline in Stream's original core business of supplying ringtones. Consumers now want real music when their mobiles ring, a market dominated by the likes of EMI, not Stream. Sell.

Numis

When we tipped Numis, the fast-growing investment bank, back in May, we did not reckon on getting a 50 per cent return in just four months. Don't yield to the temptation to cash in. Numis has recently worked on a $500m acquisition for the medical devices group Gyrus; defended Urbium after a bid from rival nightclubs group Regent Inns; and ran the flotation of Empire Online that valued the gaming group at £512m. It is now big and strong enough to enjoy a virtuous circle of growth. Buy.

Kesa Electricals

Kesa Electricals may be most famous to the UK consumer as the owner of the Comet chain, but it is hardly blazing a trail through the dark skies of the UK retail industry at the moment. Fewer house moves and weaker consumer confidence means sales of white goods - washing machines, cookers, fridges and the like - are proving very disappointing. In France, where conditions are also weak, Kesa's better-respected Darty chain is performing well. This is a brand with serious potential for expansion in Europe, and a good reason for long-term investors to keep hold of Kesa shares, as is a likely dividend yield of 4.5 per cent.

Aberdeen Asset Management

The purchase of Deutsche Asset Management's UK business has been yet another canny move for Aberdeen. The deal marks its return to the retail investment market, from which it largely exited after its brand was ruined by the split cap scandal. It also boosts its fast-expanding institutional investor business. The company's shares are trading at a modest valuation, once the profits from the Deutsche business have been factored in. Buy.

Emap

Not everything is rosy at the media group Emap, but the advantage of having the kind of broad spread of media assets that it enjoys is that the "ups " should outweigh the "downs". In the UK, the company has consumer magazines which include the gossip title Closer and men's mag Zoo, business-to-business magazines and exhibitions, and the second-biggest radio business, including the Kiss and Magic brands. It also has consumer publications in France and it sells its successful FHM men's title in the US. Now, though, is not the best moment to buy. UK advertising is a volatile revenue source, and Emap has a problem with Nursing Times, where ads have fallen since the launch of a free NHS job website. Hold.

Bioquell

Bioquell is a microscopic Rentokil, and not just in the sense that it is tiny compared with the great rat catcher. It is out to get the microscopic germs and viruses which cause hospital superbugs and contaminate labs. It wheels R2D2-style machines into the room and pumps it full of hydrogen peroxide. It is a disruptive way to clean a ward, but Bioquell believes hospitals (or governments) will decide it is worth it - not often in the UK, but in the US, where it has its first contract to routinely clean a hospital. The trouble is, since the potential of anti-superbug technology has caught investors' imagination, Bioquell shares have become expensive. Avoid.

Close Brothers

Close Brothers is on the prowl for an acquisition. The banking group wants to bulk up the bit of the business that is showing the best growth, namely asset management, which runs mutual funds and stock portfolios for private investors. A deal struck at the right price looks a good strategic move, and investors can be reassured that a beefed-up management team in this division will deliver. Profits from asset management have trebled in two years, and expanding in this area will reduce the importance of the rest of the group, which is stuttering. Buy.

D1 Oils

For environmental and (because of the high price of oil) increasingly economic reasons, the world needs to find renewable sources of fuel. D1 Oils might just be part of the solution. This is a good company with good management, which is setting up a business planting jatropha trees, from whose seeds can be produced oil for refining. It is also hoping to install local refineries to turn that crude oil into biodiesel, for which there is growing demand. Buy.

3i Group

This year is turning out to be the busiest for merger and acquisition activity since 1999-2000. With the stock market at a four-year high, it is also proving a positive time for flotations. That means 3i Group, one of Europe's biggest venture capital companies, is in rude health. It raised £910m from trade sales or flotations in just the five months to 31 August. With the global economic outlook still benign, the shares are a buy.

Taking a punt on 888.com could be a good investment

The story of online gambling companies and their coming to the stock market has been filled with as much bluff and machismo as a game of poker.

The naysayers are on a winning streak, since PartyGaming warned growth was slowing. Shares in 888.com fell on their debut this week - but gamblers should take a punt.

PartyGaming's problems are not widely shared. It has overspent on broad-brush advertising, attracting players who disappear having staked only a few dollars. The global outlook for the online gambling market is still strong. Some $8bn was staked online last year, up from $3bn in 2001, yet internet gambling is still only 5 per cent of the total. There more punters out there to tempt online.

888 is not dependent on the US, nor on poker. Most of its business is in casino games such as blackjack, which do carry a risk that punters can sometimes take the company to the cleaners. The cost of marketing also continues to rise because of mounting competition. But it is the big sites like 888 that offer the best - and safest - technology that will attract the most players in the long term.

Investing in 888 needs guts, but with its brand and dividend prospects, it is worth getting a seat at the table.

The above are recommendations from the daily Investment Column

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