A bid approach for Collins Stewart Tullett, the derivatives broking business run by Terry Smith, proved the highlight for The Independent's portfolio of tips for 2005, which posted a total gain of 12.1 per cent.
Collins Stewart shares leapt in August when it revealed it had begun an auction of the business and, although this had come to nought and the talks had been called off by the end of November, investors remain excited by Mr Smith's promise to "pursue other means to deliver value to shareholders".
The hope is that he could return cash to shareholders, sell off the traditional stockbroking business, or relocate the whole shebang to the US, where such businesses are more highly valued.
We were also well served by our decision to pick three healthcare-related stocks, a decision underpinned by the ageing population's ever-increasing demand for medicines and hospital treatment. Care UK, which is opening standalone operating theatres on behalf of the National Health Service, posted a 30 per cent share price gain as it began delivering its new responsibilities faultlessly.
Our two FTSE 100 pharmaceuticals stocks also performed strongly. GlaxoSmithKline came in ahead of the market, recovering from manufacturing problems early in the year to generate excitement over a portfolio of forthcoming medicines, including a cervical cancer vaccine. Shire Pharmaceuticals set out its tactics to protect sales of its best-selling medicine, a treatment for hyperactive children, which might not now face copycat competition as early in 2006 as previously expected.
We experimented last year with a stop-loss policy that, unfortunately, left us lagging the stock market - an outcome which was particularly disappointing given our original ten tips averaged a 20.2 per cent gain, compared to the FTSE All-Share's rise of 18.1 per cent. Most infuriatingly, a wave of panic over the outlook for commodities prices sent the shares of Antofagasta, the Chilean copper miner, down more than 20 per cent in short order in the spring, only for them to rebound very strongly after we had been forced to remove the stock from our portfolio. It ended the year 70 per cent higher than where it had begun.
Another two of our original ten were also removed as a result of the stop-loss, a policy which is perhaps best suited for less volatile markets than prevail in these days of hedge fund-dominated trading. Morse, an IT consultant, also rebounded to end the year flat, but Harvey Nash, an IT recruitment firm, has continued to slide as trading proved weaker than expected.
Two of the stocks we chose to replace these ejected companies also proved disastrous, none more so than Cornwell Management Consultants, which failed to win the expected level of business from the public sector and had to be ejected.
ITV, too, went through our stop-loss as viewers deserted the main commercial channel and advertisers became restless.
We did have success, though, with our tip of Informa at the end of October, since when the publisher of scientific journals has risen 16 per cent, correcting what we thought was the glaring undervaluation of a well-run business.
Other replacement stocks, TDG, a logistics firm we tipped in May, and Xansa, which takes over administrative functions for a company or government body, both ended in positive territory.
The rest of our original ten were a mixed bag. The life insurance giant Prudential beat the market as its Asian operations neared profitability and it positioned itself for the time when UK residents start saving again.
Expomedia, which is opening conference facilities across eastern Europe, ended lower despite winning some potentially lucrative strategic partnerships with Continental media groups.
But we were vindicated in our tip of BSS, a plumbers' merchant which had performed exceedingly well in 2004 and still had market-busting growth potential in 2005. The company's trading performance has been buoyed by renovation work at schools and hospitals and by social house building.
FOR 2006, we have been looking for companies likely to unlock value during the year - new management or corporate restructuring might be the key - or which look set to benefit from strong industry or investment trends. As usual, we have balanced the portfolio between FTSE 100 stocks and smaller companies.
Compass is still reeling from a string of profit warnings and a scandal over the way it won contracts with the United Nations, and its current chairman and chief executive are both about to exit. However, the sale of its motorway service stations division looks likely to generate more cash than originally thought, a new chief executive won't be far behind the arrival of Sir Roy Gardner as chairman, and there is no reason the core catering business should not recover its poise.
London Merchant Securities is about to finalise details of its split into two, into a property company with retail property across the UK and offices in London, and an investment company with stakes in oil and gas services ventures - a hot sector.
We are also tipping the conglomerate GUS, which is set to split off its Experian credit-checking arm this year. Its Homebase DIY chain may continue to benefit from woes at B&Q.
There is a burgeoning market for investments in Private Finance Initiative (PFI) ventures, which are building and running many public sector assets. Kier, which has a small portfolio, is included for this reason and for its strong track record in the construction, housebuilding and support service industries.
We are putting Kazakhmys, a recent addition to the FTSE 100, into the portfolio in the expectation that country in which it operates - Kazakhstan - will find investor favour in 2006 and the metal which it mines - copper - will prove as expensive this year as it did last.
We are betting that the biotechnology sector will come into fashion this year as mining did in 2005. So into the portfolio goes Ardana, a drug development company specialising in reproductive health, which already has a business-oriented management and product revenues.
FKI, one of the UK's most diverse engineering companies, ought to benefit from a sustained upturn in business investment, and has takeover potential to boot.
A private equity bid at a 23 per cent premium to the current share price - rejected out of hand in October - gives us confidence in Northgate, a van hire company with robust cashflows from the UK and a growing presence in Spain.
Xansa, a late addition to our 2005 portfolio, is in this year's too. The outsourcing company should benefit as the Government turns to private-sector administrators to help cut costs, and as other clients transfer back-office functions out to such contractors in India.
Datamonitor, a respected market research company with a fast-growing customer base, is a new tip.Reuse content