The Investment Column: Brewin a better bet than Durlacher

High-flying Peacock is still on the buy list; Inhaler group Vectura is risky but still worth a punt
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It has been a year of two halves for stockbroking firms. The burst of flotations in the spring rekindled interest in share investment and made for fat revenues. The dull summer should be thought of as half time. Since then, the stock market has rallied and interest has picked up once again.

It has been a year of two halves for stockbroking firms. The burst of flotations in the spring rekindled interest in share investment and made for fat revenues. The dull summer should be thought of as half time. Since then, the stock market has rallied and interest has picked up once again.

Investors looking to take a shareholding in a stockbroker are faced with a wide choice. In the Investment Column's capacity as honest broker, may we offer some suggestions? After all, how can your own broker give impartial advice?

The quoted companies range from those, such as Charles Stanley who reported strong results yesterday, who focus almost wholly on private client work, to those, such as Numis, who are better known for acting as broker to companies and for generating the bigger, but riskier, fees from acting on flotations and other financing work.

Charles Stanley's niche position in self-invested pensions makes it a long-term buy for the cautious. Investors of a daring bent might like to bet on the new kids on the block, Daniel Stewart, which is grabbing corporate clients on the rapidly expanding AIM market, or Numis, which operates further up the respectability scale and is run by some of the City's finest brains.

Numis's great rival, Collins Stewart Tullett, is expanding into derivatives broking with much success, and while it has not lost its touch in stockbroking, its shares look highly valued. Evolution is probably the current grandmaster of the black arts of fund raising for companies, since almost everyone unconnected with the broker fails to understand how it achieves such rich valuations for its corporate clients. The same might be said of its own shares, on 20-plus times earnings, which must fall to earth.

Weaklings such as Durlacher and Teather & Greenwood should be avoided for now.

Like Charles Stanley, Brewin Dolphin has a top three position in private client broking and is pushing hard to attract more fee-based discretionary business. Unlike Charles Stanley, it also has a strong position in corporate broking, where its reputation is gentlemanly rather than thuggish. We advised steering clear of Brewin shares in the summer, when hostilities over split cap mis-selling were at their height. The company faces a fine of up to £10m, but with the two sides inching closer to a deal and the market more clearly aware of the likely outcome, it is time to buy back into Brewin.

High-flying Peacock is still on the buy list

Peacock Group, the discount clothing retailer, could strut its stuff with pride yesterday, having delivered a big jump in profits.

True, its bonmarché division, which sells clothes for older women, was ruffled by a poor summer. Its over-60s customers feel the cold, so didn't stock up on summer tops this year. But Richard Kirk, the chief executive, promises that bonmarché's underlying sales are rising again, after falling 7.2 per cent during the first half.

So much for the bad news. At the Peacocks chain, which contributes more than three-quarters to the group's bottom line, like-for-like sales flew 9 per cent higher, while profits soared 46 per cent to £12.7m. Fears that Peacocks would suffer from Woolworths' decision to axe its BigW superstores - to which Peacocks supplied clothes - have proved misplaced. Peacocks had hopes of feathering its nest by using spare space in some of Somerfield's stores to expand its 411-strong estate, but the plans are on ice. Instead, it is using franchisees to expand into Turkey and the Arabian Gulf. In the UK, it reckons a combination of opening new stores and jazzing up old ones will keep sales flying.

It aims to open another 53 stores across its three divisions, which also now includes the Fragrance Shop, by next March. That, plus Mr Kirk's determination to offer something different from the basics sold by the supermarkets, should ensure the group hits predictions of 15 per cent compound earnings growth over the next three years. We have long advised buying the shares, and see no reason to stop.

Inhaler group Vectura is risky but still worth a punt

Vectura was styled as the "inhaled Viagra" company when it floated in June, raising £20m. The company has developed two new kinds of inhaler and a clever means of turning long-established drugs into powder for use in these inhalers. It is testing two potentially exciting new products on humans: one to help impotent men, another to treat chronic lung problems such as emphysema.

The latter product (codenamed AD237) sounds less sexy but in fact offers the bigger market opportunity. Having done two rounds of positive human trials, Vectura is already talking to bigger drug companies about licensing 237. An agreement early next year would bolster the company's finances, promising milestone payments as 237 progresses and royalties.

If it works. Don't forget this is still very early stage development work, all sorts of glitches could crop up, or the product could prove insufficiently competitive to bother launching. Similarly with VR004, the erectile dysfunction product, where the claim is it could be the fastest-acting drug available.

Vectura is risky, but not impossibly so. It uses only established drugs, has a modest revenue stream from consultancy work, and could license its inhalers to other companies.

Have a flutter.

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