We have a mixed half-term report for The Independent's share tips for 2005. We're ahead, but not by as much as the market as a whole.
The decision to major in healthcare companies is proving well founded. Care UK has not put a foot wrong as it wins lucrative contracts, and GlaxoSmithKline continues to build confidence in its ability to replenish its pipeline of new products. Even Shire Pharmaceuticals, which was notably undervalued at New Year, eventually won round investors on April's out-of-the-blue acquisition of a US biotechnology company.
Our decision to back Terry Smith's Collins Stewart Tullett is also proving lucrative, and we have made an above-market return so far from Prudential.
We remain optimistic about the portfolio. Expomedia, which runs conferences in eastern Europe, is down 8 per cent but it is a little company with volatile shares and we expect good newsflow. Meanwhile, the trading outlook for our best performer, the plumbing supplies business BSS, continues to be underpinned by health, schools and social housing spending. The stock is undervalued still.
We introduced a stop-loss strategy this year, kicking out stocks which fall 20 per cent from their peak. We have made three replacements, and in two cases we are pleased to have done so. Harvey Nash, a recruitment firm specialising in IT consultants, was dumped having fallen 17 per cent, and is now 45 per cent down from the start of the year. And Morse, a consultancy firm, is off 31 per cent.
But we also had to part with Antofagasta, the copper miner, when fears for the global economy hit their height in April. It is now showing a 10 per cent gain on the year.
Our replacements have started badly, but it is early days. Cornwell Management Consultants, TDG, a warehousing and haulage company, and ITV still have time to come good.
So to the half-time score: our notional £10,000 portfolio is showing a gain of £304 and we are confident of closing the gap on the market.
At Sinclair Pharma, the Godalming-based healthcare company, financial fortunes are tied to the licensing deals it can sign. It has a cash cushion, but investors need to see growth in royalties on sales. The share price, valuing the company at £77m, leaves only a little room for disappointment. Wait and see.
Bunzl is a one-stop shop that supplies all those bits and bobs companies need. Trading is in line with expectations and the company is spreading its customer base, covering a wider range of sectors. It has also made a large leap into the economically depressed Eurozone. A solid hold.
Dobbies Garden Centres has been trying to make a trip to the garden centre a day out for all the family. Readers who followed our advice have earned themselves a 40 per cent profit over the past year as the company has delivered on earnings promises. The shares are a racy 16 times earnings, but the sector is likely to blossom. Keep buying while Dobbies shoots up.
Exel's £328m acquisition of the haulier Tibbett & Britten last year showed good cost savings can be achieved if logistics players come together. In time, the company could be a target itself, though the company has denied an approach. Even so, at 19 times earnings, it looks fully valued for now. Hold.
Morgan Sindall has built some impressive things in the past two years, not least the reputation it has reconstructed with the City after a profits warning in 2002. The shares are higher now than they have ever been and the group has an order book of £2.9bn of future work. Hold.
Graham Wilson, the chairman of Parkdean Holidays, owner of 20 caravan parks, says the 2005 season has been as challenging as he 'could ever recall'. The company's parks do, however, constitute real assets, and a revaluation of its land bank puts its net assets per share at about 250p, excluding debt. Sunnier times should be ahead. Buy.
It is more than seven years since the Divine Comedy told people to 'take the National Express when your life's in a mess, it will make you smile.' The company's most recent performance is certainly enough to generate a grin, but with a dividend yield of just 3.5 per cent, the shares are too high.
If you want a punt on the mushrooming phenomenon of "offshoring", Xansa is a pioneer in the business, and is now is focusing on its UK customer base. The shares trade on 17 times next year's earnings, not bad for a firm that has the wind of business trends in its sails.
Martin Lamb, chief executive of IMI since 2001, has shaken up a British engineering giant that can trace its history back to 1862. But the longer-term question mark is over the global economy. Growth may have peaked, but it does not yet feel right to ditch cyclical stocks. Wait and see.
The above are recommendations from the daily Investment Column.Reuse content