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.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

peoplePaper attempts to defend itself
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
Life and Style
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
Life and Style
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Project manager - Web E-commerce

    £65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits