Our 2014 Ten to Follow for share success
The Independent's team trounced the market with a 55 per cent return from last year's stock tips. Now James Moore gives you this year's hot contenders
If the FTSE resembled a BMW last year, what about The Independent's share tipsters? While the market cruised, returning a more than respectable 14 per cent, our team trounced it.
The 2013 Ten to Follow produced a return of just over 55.3 per cent, all for less than the price of a double espresso at your local Costa Coffee.
Eight out of ten of our share selections finished the year in positive territory and with a couple of them you could very easily add the sobriquet "and how".
The best of the bunch was travel agent Thomas Cook, the suggestion of our business news editor Amy Frizell. It roared back having had major surgery applied by chief executive Harriet Green. And it probably didn't hurt that the group was the travel agent to the 2012 Olympics when things looked really dicey. There was a lot of pressure on its banks – particularly Royal Bank of Scotland – to play nice as a result.
All the same, it started 2013 very much on its own. Happily for our Ten, it delivered. We're even prepared to forgive Ms Green the awful new logo and "let's go" slogan. You can get away with a lot when you turn in a 248 per cent return.
But though Cook was the clear class of the field, it wasn't our only star. Both St James's Place, the wealth manager, and niche bank Close Brothers turned in gains of more than two-thirds and a little under two-thirds respectively. And Betfair wasn't far off that. Having seen off an approach from private equity, it proved investors were right to back chief executive Breon Corcoran when the share price sailed past the maximum amount the prospective bidders said they might pay if they could have just got access to the books. They'll be kicking themselves now. If only they'd put down a proper bad rather than one of those silly "indicative" offers, which was dependent on being given access to the books.
Meanwhile ICAP shrugged off its troubles with the regulators to return nearly 50 per cent, while Vodafone, up by just over a half, and GlaxoSmithKine, by a fifth, were both very solid. So was our tiddler to watch, Amerisur Resources.
That lot more than made up for the disappointing Aggreko, which turned in a small loss, and the awful Anglo American, which racked up a big one for its long-suffering investors.
Bear in mind also that the table we show here includes only the change in share price, and not any dividends that were paid. Were they included, the performance would have been even better.
This year we have an eclectic mix of minnows, recovery plays and solid blue-chip performers to provide ballast if things get choppy with the riskier bets.
As ever, the following couldn't have been put together without the help of The Independent's team of experts, most of whom contributed some excellent suggestions.
Should any of them take your fancy, do bear in mind that it's always wise to thoroughly research a stock before committing your own cash. And that prices can fall as well as rise. We're also probably due a bad year, but none- theless, here is the 2014 Independent Ten to Follow…
The first is a gamble: Ladbrokes (178.9p). With three profit warnings, question marks over chief executive Richard Glynn and poor sporting results to boot, 2013 has been a year to forget for the UK's second-biggest bookie. The shares started the year at 200.5p and are now more than 10 per cent off as the firm's poor online and smartphone offering left it stranded in the stalls.
But things are looking up. Ladbrokes signed a deal with software firm Playtech to use the Israeli firm's slick mobile platform, relaunching on iPhones and android early last month. Meanwhile its stores are still sucking in the punters. Results have to turn in the bookies' favour sooner or later and it's a World Cup summer as well. This counts as a recovery play.
There's not much to love about Man Group (85p). It is, after all, a hedge fund manager. And it hasn't been a very good one in recent times. Good news has been in short supply at the troubled company. However, it did manage to post its first quarterly inflows in two years during the third quarter, stopping a seemingly irreversible decline.
Man Group's shares fell again last year but expect a better performance in 2014 as new boss Manny Roman and his team continue to cut costs and restructure.
This leaves the former FTSE 100 darling in an interesting place – with one non-executive recently admitting that the company will either be "sorted or sold" over the next few months. Expect the shares to rise in 2014 as a result.
Another recovery play is Genus (1297p). The growth in the number of people living in cities and demanding more meat and dairy products ensures that long-term prospects for the bull-sperm producer and piglet breeder should be rosy. Its fortunes rest on the demand from the farmers who buy its improved strains of cattle and pigs. Last year the shares fell by 14 per cent, partly because of bad weather in Latin America. This year prospects look much brighter. Feed costs are falling but meat and dairy prices are rising. The company talks of mid to high single-digit growth. Anything better than that would see the share price motoring.
On to the smaller companies that can: Aim-listed Good Energy (229p) is a company The Independent could find few faults with. It's the only UK supplier that gets all its energy from renewable sources (some it generates itself and the rest it buys from other small generators).
However, it has proved to be a very solid investment. The shares put on 50 per cent in 2012 but we reckon they're likely to rise plenty this year as well. Partly that's because there is a backlash against the big six, which favours smaller independents, partly because it has great customer service and partly because it is investing a lot in new renewable energy generation capacity.
A recent corporate bond issue was so popular that they had to put a £15m cap on it.
Another small fry that we think could grow is software developer Fusionex (385p) which produces business intelligence software, has been winning business like crazy, and putting the frighteners on some of the IT industry's big guns. Broker Panmure has already been swooning over its prospects.
With these representing risky plays, we need a little ballast. Severn Trent (1705p) can provide it. Back in the summer a consortium of investors, including the Kuwaiti Investment Authority and Canada's Borealis Investments, reckoned it was worth more than £21 a share, and given it's now trading below £17 it could be worth a look.
The company covers some of the poorest areas in the Midlands and mid-Wales, but has kept bad debt down and reckons it can continue to cut customers' bills in real terms, even while increasing payouts to shareholders by 3 percentage points above inflation.
Trent can boast that its customers' average bills are the lowest in the country and, having offered the regulator five years' worth of below-inflation bill rises, water firms (Thames aside) seem less likely to be in the firing line than energy providers such as Centrica.
The highly regarded Liv Garfield, who has experience of dealing with regulators in her current role at BT, is also set to take the helm of the blue-chip water group this spring.
Government contractor Babcock International (1355p) ought to be another fairly safe bet. It entered 2013 with its shares valued at around a tenner a pop: the stock exits at closer to £13. Expect another big rise for this FTSE 100 favourite in 2014, as Babcock continues to pick up work from one of its great rivals, the reputationally challenged, scandal-scarred Serco.
Government will also continue its efforts to slash its spending by getting the private sector to do what was always previously the work of the state, which is Babcock's bread and butter.
IG Group (616p) has given its investors a rocky ride of late, and its really stunning growth may be behind it. All the same, I like the company because when the economy improves its punters feel more confident about trading.
It isn't looking all that pricey at 15.6 times earnings for the year to the end of May 2014 falling to 14 times. And the yield is nearly 4 per cent.
We've always been a little wary of airlines but IAG (401.4p) under Willie Walsh has been delivering. Now huge costs have been swept out of Iberian, both it and BA plus budget carrier Vueling look set to fly higher with global economic recovery.
What may cause it a few problems is if fuel prices start to rise.
In case they do, tuck away some Shell (2280p), with a dividend yield of nearly 5 per cent. With lots of cash and able to afford to gobble up minnows with interesting exploration rights, Shell is as good a place as any to get exposure to resources.
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