The Week In Review: It looks like a vintage year for wine group

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The Independent Online

Majestic Wine is making retail look easy, developing a strong brand name and reliable business model, despite stiff competition from food retail giants.

Full-year results from Majestic's 136 warehouses came in just ahead of consensus forecasts this week, with full-year pre-tax profits up 14.1 per cent.

However, Majestic's success isn't just built on cheap plonk. On the contrary, consumers are spending more than ever on quality wines, where sales grew by 25 per cent. Customers at Majestic are now spending £123 per visit.

Majestic trades at a premium. It could buy back up to 10 per cent of its own stock this year. For investors looking for a well-managed, cash-generative business, this is one vintage that should improve markedly with age. Buy.


It has been a red-letter year for investors in the support services group Amec – the shares have almost doubled from an August 2006 low of 271p. Amec is not short of cash. It has £300m burning a hole in its pocket and the disposal programme is likely to mean at least another £200m before the end of the year. Investors could be in line for a cash handout. Although management is delivering on its promises, the good news looks priced in at the moment. Not one to sell, but not one to chase higher either.


Cell therapy specialist InterCytex has manufactured human skin that has been accepted into the human body for the first time. Although the product is only at phase II trials, the potential is enormous. The global market is hard to fathom but is conservatively estimated at just $800m a year. Like all small biotech stocks it's not one to risk your skin on, but the stock is worth a punt.


Chemring is one of the world's leading manufacturers of decoy flares. This week's interim results came in at the low end of forecasts, but Chemring looks like a well-run business and should develop increased sales of its technology. With BAE Systems facing an investigation by US regulators, investors who have no ethical objection to defence contractors should switch to Chemring.


The market has not been kind to Ashtead so far this year, because of the misconception that business is suffering from the slowdown in the US housing market. However, Ashtead makes most of its money through public and private infrastructure, rather than the house-building industry. The shares trade an undemanding 11.4 times forecast 2008 earnings, with scope for upgrades Buy.


RAB Capital, the AIM-listed hedge-fund management group, is one of the few ways for private investors to get exposure to the alternative investments sector. The company runs 15 funds, and now has more than $6bn under management. The company has an excellent record. Buy.


While the major pharmaceutical groups struggle to develop new drugs, the generic pharmaceutical industry goes from strength to strength. Hikma Pharmaceuticals confirmed year-on-year growth of 60 per cent in branded drugs for the first half this week. Gross margins are running at a mouth-watering 50 per cent. Hikma is a quality growth play. Fill your boots.


There were bound to be some nerves ahead of this week's first-half trading statement from the car retailer Inchcape. Pendragon, the UK's largest dealer, gave the market a dire update a few days earlier. Inchcape's geographic spread has softened the blows from rising interest rates and over-supply in Western markets, but itis not immune to the same problems that have plagued Pendragon. Given the current uncertainty, investors should sit tight for now.


The world's largest spirits producer is a model of corporate consistency, and as such is often overlooked by investors keener on making a quick buck than a genuine long-term investment. Although growth in some key markets has slowed, Diageo has been able to offset that by pushing through price increases. Not one for quick buck punters, but for everyone else Diageo remains a quality buy.


Given the huge amount riding on Harry Potter 7, it is hardly surprising that its publishers, Bloomsbury, declined to give guidance for the coming year this week. For investors hanging on following December's warning, now is not the time to sell. The odds are on the company surprising to the upside, so for now the shares are worth hanging on to.


Accsys Technologies has pioneered a chemical process that turns softwood into hardwood in a fraction of the time, normally 70 years or so, that hardwoods take to grow naturally. Accsys expects to become profitable in the current financial year, has no debt and cash reserves of approximately £37.5m and there is plenty of upside left. Buy.

Shares in Persimmon are built on strong foundations

Unlike the houses it sells, Persimmon shares are now 20 per cent cheaper than at the beginning of the year. However, first-half sales were better than expected at £1.5bn and it also revealed a significant improvement in margins, to 20.5 per cent from 19.9 per cent a year ago, following synergies from the purchase of the rival builder Westbury.

The falling share price is down to one factor alone – investors have assumed a rising interest-rate environment can only mean bad news for housebuilders.

Persimmon itself said this week it was relaxed about rising interest rates. And with good reason – despite the four increases we've had since last August, there's been no house price crash. Instead the market has stabilised.

Nor is there necessarily bad news on the horizon from the inquiry into the house-building industry announced by the Office of Fair Trading last week.

True, the regulator will investigate whether companies such as Persimmon are sitting on banks of land longer than necessary, in the hope that they will be worth more when they are finally developed. But equally, the OFT inquiry will also probe planning delays – a perennial cause of complaint for developers, who say red tape prevents them building new homes more quickly.

Economists believe building 200,000 new homes each year is the minimum necessary to satisfy demand, but the UK has repeatedly failed to hit that target.

Given the imbalance of demand and supply, Persimmon's strong position in the house-building market, and its cheap valuation – 7.7 times forward earnings looks attractive – the shares would be worth a look, even without the yield of 4.4 per cent.

Not many stocks are built on such solid foundations, and the current weak share price is an excellent buying opportunity.

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