The Week In Review: Gambler's friend hits the jackpot

The legal status of internet gambling in the US is cloudy, but the numbers of Americans, in common with people across the world, who are punting on sports betting sites or playing internet poker has been growing exponentially.

The legal status of internet gambling in the US is cloudy, but the numbers of Americans, in common with people across the world, who are punting on sports betting sites or playing internet poker has been growing exponentially. The traditional banks won't touch their money, so NETeller has grown into a significant business as a result of this opportunity.

It operates an e-wallet, ferrying money between the gambler and the betting website and taking on the task of verifying users' identities and checking for credit card fraud. An average of 1,800 people a day signed up to NETeller last year, and it made £45m from its cut of transactions. We tipped the stock after its flotation last April and it has more than tripled.

Nervous investors will want to make sure the company is keeping control of administrative costs, but the opportunities continue to outweigh risks for investors with a bit of gambling money available. NETeller has just made an acquisition of a payments company in the Far East that will allow it to expand into gambling-mad China, where its expertise in cross-currency transactions puts it ahead of the local banks. Keep buying.

KILN

An insurance underwriter specialising in marine, aviation and special-risk insurance lines, Kiln was badly stung by last year's US hurricanes, but its profitability is still one of the best in its sector. Natural disasters have helped to reinforce premium rates, and Kiln promised a dividend of 3p (a fivefold increase on last year) for the remainder of the insurance cycle. Buy.

SEVERN TRENT

With more than 75 per cent of the group's profits coming from the highly regulated water industry, Severn Trent's performance has been solid. New, higher prices can be introduced this year so the industry can invest in the country's water infrastructure. A vigorous new management team at Severn ought to be able to make these improvements efficiently in order to return as much as possible to shareholders. Buy.

INTERMEDIATE CAPITAL

It has been a busy year for this finance house. It provided £85m for the £1.75bn buy-out of the AA from Centrica, and a similar amount to back the acquisition of Saga. Meanwhile, it cashed in its stakes in Pinewood Studios and Halfords, which both floated in 2004. Intermediate specialises in mezzanine finance, a mixture of debt and equity for buy-out vehicles. Hold.

CENES PHARMACEUTICALS

This has one of the thinner pipelines of potential products in the UK biotech sector: just two drugs in human trials. Its most advanced, M6G, is a new version of morphine. The science will speak for itself in the end. Investors must not put more on CeNeS shares than they can afford to lose.

DAT GROUP

Shares in this mobile telecoms software provider have more than tripled since the company floated in December. Its great hope for growth lies in the success of Tabella, a new platform designed to rival the successful Blackberry system, which gives users remote access to e-mail, internet and other data systems. DAT owns an 80 per cent stake in Tabella. Worth a punt.

BURREN ENERGY

The oil company that focuses on the Caspian region and West Africa has released a set of highly impressive maiden results, delivered thanks to an increase in production of 74 per cent to 14,200 barrels of oil per day. It has no plans to stop there - Burren wants to drive production to 24,000 barrels by the end of the year to take advantage of rocketing oil prices. Buy.

MULBERRY

No self-respecting fashionista has to think twice about whether to bag the latest leather offering from Mulberry. The must-have "Roxannes" in coconut matte glove (that's a big white handbag to you and me) have been flying off the shelves so fast this spring that sales have overshot expectations. Buy the shares, too.

HALFORDS

Halfords, the car accessories and cycles retailer with 397 stores, has been introducing mezzanine floors in its warehouses, adding anything up to an extra 33 per cent of selling space. This extra space and the continued roll-out of new stores ought to keep the company growing throughout any consumer downturn. Hold.

ARENA

Arena Leisure is the owner of six of the country's busiest racecourses, accounting for 25 per cent of all UK fixtures. It has slimmed down its At The Races digital channel, which ought to break even in 2006, and with regulators demanding more professionalism in racing, Arena is well positioned for the long-term. Its shares are still a gamble, but they are an odds-on favourite.

Local papers look like bad news

THEY SAY that today's newspaper is tomorrow's chip paper. Recent record financial results from Johnston Press - publisher of 241 local titles - were old news even before they were released.

No round of applause, then, for the rises in turnover, profits and dividends. Instead, the shares tumbled and have kept on sliding. Private investors should use any brief spikes as an opportunity to get out.

The problem is that 2004 - when it was generating strong revenues from both classified and product advertising - appears to be about as good as it will get for Johnston.

Johnston's "life is local" philosophy is a coherent one, and the company has done well to embrace new media and to shore up the circulations of its papers with innovative supplements.

But the fact remains that fewer people are picking up their daily local rag, and even the growth in weeklies is topping out, it seems.

Advertising revenue growth in the early weeks of the year is less than half that of 2004 and there is no sign it can pick up again. Property advertising will fade as the housing market cools. Car dealer adverts, too, have been fewer and further between.

We have been holders of Johnston shares for the past couple of years and they have done well. But yielding a measly 1.5 per cent dividend, they now look too expensive. Sell.

The above is a selection of recommendations from the daily Investment Column

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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