Time to dump IT stocks for ye olde blue chips

Non-technology stocks, shunned and devalued, are looking irresistible

The snag to buying shares is that you need money. However, this can be a blessing in disguise because, unless you have a bottomless pit of cash into which you can dip whenever you spot a fresh opportunity, it means you must sell shares to buy new ones. And sometimes, when you detect a sea change in the marketplace, it is time to contemplate a reappraisal of your portfolio.

The snag to buying shares is that you need money. However, this can be a blessing in disguise because, unless you have a bottomless pit of cash into which you can dip whenever you spot a fresh opportunity, it means you must sell shares to buy new ones. And sometimes, when you detect a sea change in the marketplace, it is time to contemplate a reappraisal of your portfolio.

This week, in common I suspect with many serious investors, I have been considering fairly dramatic alterations to the structure of my portfolio and indeed I have taken the first steps towards altering the balance.

I have sold a significant number of my technology and Internet stocks. Let me quickly point out that this is not because I believe bubbles are bursting or I am concerned that I hold a bunch of dotty dotcoms. On the contrary, I believe that there is no bubble to burst and that there is considerable strength in depth in the TechMARK sector.

My motivation is quite simple - I can't afford to ignore the bargains that have been created in the traditional market by the flight to new technology.

Since the autumn of last year money has been siphoned away from the more conventional sectors to feed the new IT cuckoo. Private investors have been enticed by the price explosion in computer-based stocks. Institutions have abandoned their safety-first stance and followed suit, scared that their supporters will be angry at missing out on the inventions-and-ideas boom.

The mass movement has left the value stocks gasping for funds. Increasing turnover and profit figures have seemingly counted for nothing. Unless those two magic words, Internet and technology, are somewhere in the company's statement of intent, the share price has gone down.

However, it has begun to dawn on investors that another very important magic word, profit, is missing from the statements made by many of the new businesses. Without profit, earnings-per-share is a non-existent statistic and share- holders' dividends can't be paid.

In my opinion therefore this is the time to examine your technology holdings carefully and if you cannot identify a move towards profit, think carefully about selling. If you decide to sell, why not consider buying the amazing bargains now on offer from the Big Friendless Giants? Let me suggest a few for your microscope.

The banks must be bargain basement value at the moment. Mr. Cruickshank wagged a warning finger at them this week and we feared that very nice man - that very, very nice man - Gordon Brown would tread heavily upon them. It didn't happen. Banks will now pay lip service to change, offer a few crumbs like free cashpoint usage, and continue to coin it in.

Money goes to money. To illustrate the point, any single one of the Big Three banks makes more profit than the whole of the British supermarket industry put together.

In the banking sector I like Alliance and Leicester and Lloyds TSB. Both stocks have plummeted this year.

A & L is interesting, not least because the directors have been buying shares and also A & L itself is one of the few banks on the share buy-back trail. Takeover? - it's an obvious target and this sort of activity is one of the early signs. With a P/E of less than 9 this must be a steal.

Lloyds is reputed to be the best managed business in the sector and it looks as though their Internet arm is working at last. There is an even balance between the excellent profits generated by their activities in retail banking, mortgages, insurance, wholesale and international banking.

The bank also seems to be striving for a higher profile. I noted that when the Cruickshank report came out the Lloyds chief executive was the banking czar chosen by the BBC to put the industry's case on the lunchtime news bulletin.

Now let's turn our attention to the restaurants, pubs and breweries sector. In recent months it has been completely out of favour, but why? Look around in your locality. All the pubs and restaurants are packed and the days of the nice little cheap place for a good night out have gone.

Two of the bigger players in this sector appeal to me. Whitbread and Scottish & Newcastle have both suffered a halving of their share prices since the middle of last year, but examine their business records and they haven't put a foot wrong.

Despite being kicked out of the FTSE 100 this month Whitbread is steaming ahead. The company is on track to deliver profits of £382 million this year and there's a dividend yield of over 6%. The TGI Friday restaurant concept is rolling out well and this month they added 10 Greene King outlets to it. Here's a strong company with an undervalued share price.

The same can be said of S & N which this week forged a link with the giant French food company Danone, controller of substantial beer interests in France, Belgium and Italy.

The Edinburgh-based company is the driver in the alliance and this considerably strengthens the company's foothold in Europe. It also adds a new dimension to the S & N range because the French beers include Kronenbourg 1664 and Peroni, unisex lagers that go down well with teens and twenties.

And what about Boots? In the summer of '98 the share price of this versatile retailer touched £10.70. Almost two years later and it has halved, yet in that time turnover, pretax profits and earnings-per-share have all gone steadily up. Far from ignoring the competition from the Internet, it has joined it and plans to become Britain's premier online health brand.

This boycott of large public companies with an impressive track record cannot go on. Sense will prevail and I forecast a swing away from promising companies to proven ones.

Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Arts and Entertainment
booksThe best children's books for this summer
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
Colombia's James Rodriguez celebrates one of his goals during the FIFA World Cup 2014 round of 16 match between Colombia and Uruguay at the Estadio do Maracana in Rio de Janeiro, Brazil
sportColombian World Cup star completes £63m move to Spain
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
News
news
News
i100
News
people
Sport
Antoine Griezmann has started two of France’s four games so far
sport
Life and Style
techYahoo Japan launches service to delete your files and email your relatives when you die
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Programme Director - Conduct Risk - London

    £850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

    Business Analyst (Agile, SDLC, software)

    £45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

    Finance Manager - Bank - Leeds - £300/day

    £250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

    Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

    £100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
    Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

    Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

    Meet the man who doesn't want to go down in history as the country's last Scottish Secretary