A telecoms surge as crash barriers keep us upright

'IoS' Share Tips: At the interim stage, money in the Vanco has helped us prosper despite the woes of Wm Morrison
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The Independent Online

Six months ago, when The Independent on Sunday team picked their top stocks for 2005, the portfolio that emerged was a diverse one. Sitting alongside a FTSE 100 retailer, broadcaster and publisher were two telecoms firms - hardly the City's favourite sector - and an engineer with a market value of just £73m. A disparate bunch, certainly, but at this halfway stage, a rather profitable one.

Six months ago, when The Independent on Sunday team picked their top stocks for 2005, the portfolio that emerged was a diverse one. Sitting alongside a FTSE 100 retailer, broadcaster and publisher were two telecoms firms - hardly the City's favourite sector - and an engineer with a market value of just £73m. A disparate bunch, certainly, but at this halfway stage, a rather profitable one.

If you had invested £100 in a fund tracking the FTSE All-Share index, you would currently have £105.50. But if you had plumped for the Sindy portfolio, your £100 would now be worth £111.08.

And that's despite one of the biggest names in the portfolio enduring a truly dire start to the year.

Wm Morrison

That stock is, of course, the crisis-ridden supermarket chain. At the time of our recommendation, we added the caveat that the hoped-for recovery might take longer than a year to emerge. And annoyingly, we seem to be right. Morrisons has been sunk by four profit warnings, boardroom squabbles and dire corporate governance standards. The only hope is that a bottom may have been reached, although not everyone is convinced the run of bad news has finished quite yet. And, closing as it did on Friday at 185.25p - down 11 per cent since the start of 2005 - it still has a way to go before it starts earning money for the Sindy portfolio.

Telecom Plus

The other disappointing performer has been one of the two telecoms-focused companies. The prospects were good for Telecom Plus, with the City seemingly impressed by its strategy of offering cut-price phone calls, gas and electricity. But last year the group warned that rising wholesale gas prices were hitting home, and the problem has refused to go away. Profits have suffered and, although revenues are rising, higher costs are adding to the gloom. The City's enthusiasm has waned; the group closed on Friday 22 per cent lower at 173.50p.

Vanco

But this is not about the bad news, it's about the good, and so to our second telecoms stock. Vanco's shares have soared, up 46 per cent to 391p, and is our best-performing stock so far. The results in April revealed a doubling in profits, after a string of new contract wins that allowed it to boast British Airways as a client alongside Ford, Siemens and Lloyds TSB. It seems the group's strategy of leasing capacity and selling it on to customers, rather than owning cables or telecoms masts, is paying off - for the time being at least.

ITV

Failing to take its cue from its FTSE 100 stablemate Morrisons, ITV has also enjoyed a strong start to the year and is currently up 11 per cent from its opening mark at 117p. This is despite a run of ratings failures (Celebrity Wrestling anyone?) and fears of an advertising slowdown. Yet ITV has continued to deliver the goods, with the group last month confirming that first-half sales should improve by 3 per cent and that advertising revenue would be on par with the previous year - a respectable performance given the current economic concerns.

Pearson

The publisher of the Financial Times and owner of Penguin Books also finished ahead on Friday, at 656.5p, although the 4.5 per cent rise this year is just below the FTSE All-Share improvement of 5.5 per cent. The group said in April that it had made a "good start" to 2005, with advertising revenue at the FT up 3 per cent and Penguin getting back on track after a tough 2004.

Hill & Smith

And so to our final stock, as selected by Albert Nissé, the business editor's younger son. Despite trying to eat the FT's prices pages while choosing his stock (he was only six months old), he salivated on a corker. The group, which makes temporary crash barriers and steel fencing, has had a sterling start to the year, bolstered by a series of government contract wins. It closed on Friday at 165p - an impressive 38 per cent rise on the year.

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