After a tip-top year, here's our 10 share picks for 2013
The Independent team was in winning form in 2012. James Moore aims to repeat the feat
Forget about the Lottery: If you want to get rich, read The Independent's share tips. And if that's not setting us up for a fall, I don't know what is. Nonetheless, last year's 10 to follow didn't just beat the market – they left it for dead. Had you invested £1000 in the shares of each of the 10, you would today be sitting on £14,748, a return of 47.5 per cent. By contrast, having ended at 5897.81, the FTSE 100 index increased by 5.8 per cent on last year's close of 5572.28, turning £10,000 into £10,580 (excluding dividends in both cases).
Nine of of our 10 ended the year in positive territory, with only African Barrick Gold disappointing (for the second year running). I won't be making the same mistake a third time.
The best of the bunch was oil minnow Providence Resources, which more than doubled in value after striking black gold off Ireland, but Lloyds Banking Group, Moneysupermarket, Intermediate Capital and William Hill all posted share price rises of more than 30 per cent.
While I'm celebrating (I have the final say), the 10 couldn't be constructed without the help of my colleagues on the Independent business desk. So kudos to them. Unfortunately, their good work means expectations are now sky high. So, without further ado, here is this year's 10:
We start with Vodafone (154.45p), which has been under a cloud for much of the year, and not just from those people who are unhappy about the amount of tax it pays. Life's not easy for telecoms companies, but Vodafone is doing better than most, and now offers a prospective yield of almost 7 per cent while trading on a modest multiple of 10 times forecast earnings for the year ending March 31.
The vast majority of analysts rate it as a buy or better. That sometimes has to be taken with a pinch of salt – Vodafone works with a lot of investment banks. All the same, I think they have a point. The shares are cheap.
GlaxoSmithKline (1335p) is a classically defensive play. It's not the most original of tips, I have to admit. But, like Vodafone, the shares have been treading water. They trade on just 11 times next year's forecast earnings with an attractive dividend. Investors have started to cotton on to the fact that this company is undervalued but there should be more to come.
ICAP (307p) has endured a rough year. Banks aren't trading with each other like they used to, and interest rates have remained consistently low, removing a key source of volatility that the company thrives on. Michael Spencer, founder and chief executive, has complained about the toughest trading conditions in his 36-year career. The company wouldn't appear to be in a happy place but Mr Spencer is no one's fool. He has battened down the hatches and slashed costs. ICAP now trades on under 9 times next year's earnings, and yields 7 per cent. The shares have been creeping up recently because the market has realised that the shares have been oversold.
Close Brothers (863p) is a three-legged bank that survived the financial crisis without a bailout. In banking (leg 1), it has stuck to its traditional niche areas of car finance, asset and property finance. Very much directed towards SMEs, it has been taking lots of business from the big banks. Fund management (leg 2) has been a basket case for some years but, under chief executive Preben Prebensen, it is now focused on high net worth individuals and could benefit from the regulatory changes to the way financial products are sold.
Broker Winterflood (leg 3) has had a tough time, but is highly geared to any recovery in share trading, particularly among private punters. The shares rose 44 per cent last year. But they were criminally undervalued and at 10.7 times forecast earnings for the year ending July 2013 with a rock solid dividend they still aren't overpriced.
I've long been a sceptic when it comes to Betfair (686.5p) because it has been high on hype but low on delivery. However, I'm willing to take a punt on Breon Corcoran getting the company to live up to expectations. The former head of the wildly successful Paddy Power online business could also bring a bit of PR savvy to a business that hasn't always been easy to like. Results for the year ending April 30 might not look too clever, not least with the company pulling out of Germany and Greece after rows with regulators. But even at 20 times next year's earnings, there is scope for a bounce in the shares towards the end of next year.
Our then market reporter Toby Green was responsible for last year's wonder tip, Providence Resources. This year, he has gone for Anglo American (1894p). This behemoth has been among the worst-performing Footsie stocks of the last 12 months so 2013 could see a recovery. Shareholder pressure prompted boss Cynthia Carroll to announce her resignation in October, and a new face with a new plan (her successor has yet to be appointed) could be a catalyst for the stock to regain some of last year's losses. There has been some encouraging data out of China recently, and at 12 times next year's forecast earnings the company looks cheap.
Aggreko (1740p) is the world's biggest temporary power-supply company, and has had a wobbly few weeks. The lack of an Olympic boost and US troops pulling out of Afghanistan will dent revenues by £100m next year, and the shares are 29 per cent off their year high. But this FTSE 100 firm hasn't become a bad company overnight. Even at 17.5 times next year's forecast earnings, now is the time to buy a business on the dips that derives the lion's share of its revenues from sprightly economies outside sluggish European markets.
St James's Place Wealth Management (421.5p) with its ever-expanding network of financial advisers ought to do well out of the decision by the Financial Services Authority to shake up the way financial products are sold. It targets wealthy people who can afford to pay for advice, and has a habit of beating expectations. Analysts think the shares could benefit if Lloyds Banking Group offloads its 60 per cent stake.
For this year's risky plays, first up is Amerisur Resources (46.75p), listed on the junior Alternative Investment Market. Its shares are expected to soar this year as it prepares to increase daily production from its south-east Columbian oil field from 5,000 barrels a day to 20,000 by 2015.
Finally, we give you Thomas Cook (48p). The tour operator's future was in doubt at one point, and it still has too much debt. But while Harriet Green, chief executive, is slightly bonkers (she does yoga at 5am), she knows her onions and it is worth betting that she can spark a revival in the company and the shares.
... and where City mouths are putting their money
As ever, our top stock-pickers are an eclectic mix of fund managers, spread betting gurus, equity strategists and even a financial adviser. But most of them endured a torrid time of it last year. Just three tipped companies that ended the year in positive territory, and two of those went for Burberry, which returned just 3.5 per cent. Overall £1,000 invested into each of last year's eight expert tips would have ended with a 2.9 per cent loss, turning your £8,000 into £7,765 (before any dividends).
The standout was again Steve Clayton at Mirabaud Securities who kept the flag flying for the pros with a 22.3 per cent gain on Telecity. As for their FTSE predictions, the optimists were the winners. So hats off to Joshua Raymond, from City Index, and Andrew Hannay at Edinburgh investment adviser Robson MacIntosh, both of whom came within a whisker of getting it exactly right with their predictions of 5,900. All three are back this year too.
Steve Clayton, analyst, Mirabaud Securities
FTSE 100 close: 6500
Stock to follow: Dignity (1090p)
"Death and taxes, as they say. Taxes keep going up, driving more of us toward Dignity. The group's pre-sold funeral plans are helping it to win market share in an industry where competition is genteel and margins are high, because, after all, no one haggles. Later in 2013, we expect the market will focus on Dignity's ability to make a further return of capital, which could enhance shareholder returns rather meaningfully. With a very predictable top-line outlook, Dignity is a high-quality growth stock that investors should aim to be a shareholder in, not a customer of…"
Andrew Hannay, director, Robinson Macintosh
FTSE close: 6400
Stock to follow: Parkmead (14p)
"I have a personal interest in this one, and have great hopes for it. The company is a relative minnow and operates mainly in the North Sea. The company is led by Tom Cross, and we hope that he will be able to repeat his feat in building up Dana Petroleum, which was sold in 2010 – the so-called deal of the decade. Target price 50p. Stick with Shell, too, for the long term."
FTSE close: 6100
Stock to follow: Sports Direct (386.5p)
" 'The trend is your friend' is one of the key motivations behind those continuing to buy into Sports Direct shares, and this remains true for 2013. Sports Direct has performed outstandingly over the last few years, making well-timed and cost-efficient acquisitions, and has become the low-cost sports retailer of choice. Its store footfall is good and its online presence is growing well, having been an early adopter in the sector to the online space."
David Buik, Cantor Index
FTSE close: 6550
Stock to follow: Salamander Energy (190p)
"This South-east Asian oil exploration outfit has been disappointing since its IPO in 2006, when shares were issued at 250p. However, it has very good management, with James Menzies at the helm as chief executive. Many energy watchers have told me that Salamander will come good, even though it could well be that it will eventually be acquired down the line, representing excellent add-on value to an existing energy titan."
Stephen Adams, head of UK equities, Kames Capital
FTSE close: 6550
Stock to follow: TUI Travel (282.5p)
"Although TUI Travel performed extremely well in 2012 and entered the FTSE 100 Index, there are reasons to suggest that there is more to come in 2013. Foremost, the supply of packaged holidays both in the UK and Europe looks benign. There is scope for upgrades to earnings estimates as we move through the year, and in turn the dividend will be meaningfully increased from what is an attractive starting yield level."
Jane Coffey, head of equities at Royal London Asset Management
FTSE close: 6200
Stock to follow: Ashtead (426.3p)
"Equipment-hire company Ashtead can continue to perform well in 2013 as we start to see an improvement in construction activity, particularly in the US residential market, while the trend towards renting rather than owning equipment should enable them to grow market share even in a flat economic environment."
Mark Paddon, head of research, FinnCap
FTSE close: 6300
Stock to follow: Utilitywise (94p)
"Utilitywise is one of the leading UK energy management service companies strategically focused on commercial energy customers. While its origins and revenue model are based on energy procurement, the group has established a market-leading IT infrastructure and energy services portfolio that is facilitating a strategic move from energy broker to a full service energy management consultancy. Further expansion in the UK is under way together with selected UK acquisitions. In the year to July 2013, finnCap forecasts a 69 per cent increase in revenue"
Jeremy Batstone-Carr, chief economist, Charles Stanley
FTSE close: 6200
Stock to follow: ARM Holdings (768p)
"I think my stand-out would be ARM Holdings, but it's far from cheap. My nap sector (not covered in the list but a play on a revival in global growth) would be Mining. The sector performed poorly in 2012 as metals prices fell and earnings were clobbered but IF the authorities get it together, mining will do well."
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